With a Federal Election looming, 2019 is shaping up to be a very interesting year!
The ALP has announced a number of policies that could represent the most significant tax changes in recent years.
We’re not recommending who to vote for, but it’s important that you have an understanding of how these potential tax and other changes could affect you.
For the moment, we are recommending to our clients a “wait and see” approach before taking any specific action on any of these proposals. An election needs to be won and then legislation needs to be passed before new laws take effect.
But should there be change, there may also be real opportunities that present themselves to appropriately restructure your tax and wealth affairs. We are always on the lookout to achieve the best financial position possible for you.
The following points outline some of the key ALP tax policies of interest compared to the Coalition’s tax policies:
1. Restrict deductions on personal tax-related expenses to a $3,000 cap per individual, per year. No cap on personal tax-related expenses has been proposed, although the ATO has made adjustments to Item D10 – Managing tax affairs to obtain a more detailed breakdown of what is being claimed by taxpayers at this label from the 2018 ‘I Returns’.
2. Reduce the maximum general CGT discount from 50% to 25% with exceptions for grandfathered investments, investments made by super funds and assets of small business owners. The Coalition has not indicated a desire to change the maximum general CGT discount from 50% for eligible taxpayers.
3. Limit negative gearing to investments in new housing, with grandfathering for pre-existing investments. Labor has proposed any losses from new investments in shares and existing properties will still be permitted to be used to offset investment income tax liabilities. Any deferred losses can then be carried forward to offset the final capital gain on investment. The Coalition has not indicated a desire to change the current negative gearing rules.
4. Remove the ability for certain taxpayers to claim excess imputation credits for cash refunds. The Coalition has not indicated a desire to change the current ability for eligible taxpayers (incl individuals and SMSFs) to receive cash refunds for excess imputation credits.
5. Apply a minimum tax rate of 30% to all distributions from discretionary trusts (non-fixed trusts) to mature individual beneficiaries. The Coalition has not indicated a desire to change the current rules in relation to taxing discretionary trust beneficiaries at their applicable marginal tax rate.
6. Introduce an Australian Investment Guarantee from 1 July 2020. This accelerated depreciation for business proposes to immediately allow a 20% write-off for eligible depreciating assets. The Coalition has announced that from 29 January 2019 the instant asset write-off threshold for small business enterprise taxpayers will increase to less than $25,000 and this will apply until 20 June 2020.