Overview
In this, an election year, the Opposition leader’s Budget-in-Reply address is of greater importance than is usually the case. Polls have the ALP as a strong chance to taken government in what is almost certainly going to be a May election. With this in mind, careful consideration must be given to the policies outlined by Bill Shorten in April 4’s Budget reply.
Much conjecture in the lead-up to the early, April 2 Budget was around competing tax policies. In Tuesday’s 2019/20 federal Budget, the Coalition government unveiled policies to strengthen the tax cuts legislated in 2018. The Opposition has expressed support for some elements of these further cuts, while also announcing opposition to the cuts for higher income earners and proposals to increase those for lower income earners.
These alternate tax cuts are accompanied by a range of already announced tax policies focused on imputation credits, negative gearing and capital gains tax. The Opposition have announced that they plan to increase the Superannuation Guarantee faster, make it available to more employees and reduce the non-concessional contributions cap.
With few of the Government’s Budget proposals passing this week, it seems the reform canvas is relatively blank. The chances of the Opposition implementing their proposals are at least as high as the Government’s, and it is important that advisers and their clients understand the policies of all sides of Australian politics that affect them.
Budget night announcements
LaMITO increase
Effective date: July 1, 2018
The Government proposed to increase the Low and Middle Income Tax Offset (LaMITO) from the 2018/19 tax year onwards. The Opposition has stated support for the Government’s proposed increase and has proposed a further increase for those earning under $48,000. A client’s LaMITO will be based on their taxable income as shown in the table below.
| Taxable income | Current LaMITO | Government’s Proposed LaMITO | Opposition’s Proposed LaMITO |
| Up to $37,000 | $200 | $255 | $350 |
| $37,001 to $48,000 | $200 plus 3c for every dollar above $37,000 | $255 plus 7.5c for every dollar above $37,000 | $350 plus 6.63c for every dollar above $37,000 |
| $48,000 to $90,000 | $530 | $1,080 | $1,080 |
| $90,001 to $125,333 | $530 minus 1.5c for every dollar above $90,000 | $1,080 minus 3c for every dollar above $90,000 | $1,080 minus 3c for every dollar above $90,000 |
| $125,334 and above | Nil | Top threshold increased to $126,000 | Top threshold increased to $126,000 |
2022/23 personal income tax cuts
Effective date: From July 1, 2022
The Government proposed to increase the upper threshold of the 19 per cent tax bracket to $45,000 from $41,000 from July 1, 2022. This proposed change complements the already legislated increase in the upper threshold of the 32.5 per cent tax bracket.
The Opposition have not committed to this tax cut.
2024/25 personal income tax cuts
In 2024/25, the 37 per cent tax bracket is currently legislated to be abolished and the top tax bracket will be for those earning over $200,000. It is at this time that the Government proposed an additional tax cut, reducing the 32.5 per cent tax bracket to 30 per cent.
The Opposition have stated that they oppose this tax cut.
Supplementing the immediate asset write-off for small business
Effective date: Presumably April 2, 2019
The Government proposed to increase the instant asset write-off for small business to $30,000 until June 30, 2020. The aggregated turnover test was also proposed to be increased from $10 million to $50 million. The Opposition supported this proposal and it has already been passed into law.
To compliment this business tax measure, the Opposition also proposed a 20 per cent tax break for every business, regardless of size, that invests in equipment above $20,000. Detail on the application of this proposal is relatively thin at this time.
Negative gearing
Effective date: As yet uncertain
The Opposition has reconfirmed its proposal to limit negative gearing to new housing and existing arrangements. Losses from new investments, including those from shares and existing properties, will only be able to be used to offset investment income tax liabilities. Such losses will also be able to be carried forward to offset the final capital gain on the investment.
All investments made before the commencement date will not be affected by this change.
Previous announcements
Imputation credits
Effective date: July 1, 2019
The Opposition has proposed to end cash refunds for excess imputation credits for individuals and superannuation funds. This means that imputation credits for individuals and superannuation funds will no longer be a refundable tax offset, and will return to being a non-refundable tax offset.
The Opposition’s policy will not apply to bodies such as ATO endorsed income tax exempt charities and Not-for-profit institutions with deductible gift recipient status. The Opposition has also stated that recipients of Centrelink and DVA pensions and allowances will still be able to receive imputation credit refunds. This will extend to Self Managed Super Funds where at least one member receives such a payment.
Capital gains tax
Effective date: As yet uncertain
The opposition has proposed to halve the capital gains discount for all assets. This will reduce the capital gains tax discount for assets that are held longer than 12 months from the current 50 per cent, to 25 per cent.
All investments made before the commencement date will not be affected by this change. This policy change will also not affect investments made by superannuation funds nor will the CGT rules change for small business assets.
Phasing down the Superannuation Guarantee threshold
Effective date: From July 1, 2020
Currently, employers are not required to pay Superannuation Guarantee (SG) contributions for employees earning less than $450 in a calendar month. The Opposition proposes to reduce this threshold to $350 in the 2020/21 financial year, and to eradicate the rule entirely by 2024/25.
Increasing the rate of SG sooner
Effective date: Unknown
The Opposition has committed to increase the rate of SG to 12 per cent faster than is currently legislated.
SG on Paid Parental Leave
Effective date: July 1, 2020
It is proposed that SG be paid on government funded Paid Parental Leave and Dad and Partner pay.
Lowering the threshold for Div 293 tax
Effective date: Unknown
Currently, clients with income and taxable super contributions above $250,000 in a financial year are subject to additional tax of 15 per cent on concessional super contributions. This tax is applied to the proportion of taxable contributions above the $250,000 threshold. The Opposition proposes to reduce this threshold to $200,000.
Reduction in the non-concessional contribution cap
Effective date: Unknown
The Opposition propose to reduce the non-concessional contribution cap from its current level of $100,000 to $75,000. This will also reduce the impact of the bring-forward provisions.
Watch for further change
The policies outlined in this article are those outlined by the Opposition at the time of writing. With an looming election campaign likely to last five to six weeks, the platforms of all the major parties will inevitably evolve over that time. It can be said with certainty, however, that the two largest parties do have significant policies differences in the areas that influence financial planning.
