Labor’s Policy In Brief Income Tax
Superannuation
Cash refunds from excess franking credits to be disallowed from 1 July 2019 for individuals and self-managed superannuation funds.
Decrease in the adjusted taxable income threshold for Div. 293 tax assessment purposes (additional tax on super contributions for high income earners) to $200,000 from its current level of $250,000;
This would result in the reintroduction of a non-refundable tax offset whereby franking credits that exceed a taxpayer’s liability would be forfeited. You should seek financial advice in relation to your investment strategies going forward. Proposal to halve the current CGT discount percentage from 50% to 25% for all assets which are held for more than 12 months. This change will apply from an effective date yet to be determined and it is unclear whether all investments made before the date of change will continue to attract the full 50% discount under grand-fathering provisions. Proposal to limit negative gearing only to newly constructed housing. From the effective date of change, taxpayers will only be able to offset their net rental loss against other taxable income (e.g. wages) where the property loss has been generated on a ‘newly constructed house’. Where investments made in shares and preowned dwellings post enactment of proposed legislation, that result in an income loss, these losses will not be available to be offset against other taxable income. These losses will be quarantined until such time to offset the final capital gain on the disposal of that asset. Taxing distributions to adult beneficiaries of discretionary trusts, is designed to prevent the distribution of income to family members who have lower marginal tax rates. This will be enacted via a new minimum tax rate of 30 per cent on all discretionary trust distributions made to adult beneficiaries from 1 July 2019. Introduction of a new Investment Guarantee Scheme which would allow all businesses to immediately claim 20 per cent of the cost of eligible depreciating assets in the first year of use.
Cash refunds from excess franking credits to be disallowed from 1 July 2019 and the reintroduction of non-refundable tax offset whereby franking credits that exceed a taxpayer’s liability would be forfeited. The Trustee of the Superannuation Fund may require financial advice in relation to current and future investments for the benefit of the members. Removal of the tax deductibility of personal superannuation contributions (which have applied from 1 July 2017). This infers, the “10% rule” could be reinstated, forcing employee to utilise salary packaging or forgo the deduction.
Reduction to the non-concessional contributions cap from its current level of $100,000 to $75,000, unclear whether the bring forward arrangement will still be available. Reintroduction of the prohibition on direct borrowing by Self Managed Superannuation Funds (SMSFs) for property investments. This will effectively remove the current ability to use limited recourse borrowing arrangements. Existing arrangements may be grand-fathered. Removal of the current freeze in the increase in the Superannuation Guarantee (SG) rate which was originally proposed to progressively increase to 12 per cent by 1 July 2025. Should you wish to discuss any of the proposed changes and the potential impact on you and your business, please do not hesitate to contact us. — Dani Di Blasio Partner, Murdoch Partners PH: +61 3 9854 8999
This claim would be in addition to the normal depreciation claim available. For example, an asset costing $1 million with an effective life of 10 years would allow a first-year claim of $280,000 ($200,000 upfront + $80,000 being first year depreciation of the balance over 10 years). Measures to increase personal income tax rates including winding back recently introduced personal tax cuts from 1 July 2019 and reinstating the 2% budget repair levy which ceased on 30 June 2017 for a further 4 years. A cap of $3,000 is to be applied to individuals in claiming deductions for managing their tax affairs. This may have a significant impact where an individual has complex tax affairs (i.e. complex CGT calculation, PSI issues, termination of employment or trust distributions involving capital gains or streaming, etc.). It is currently unclear how this cap would specifically apply including whether there is a carve out for non-taxation fees (i.e. preparation of financial reports) and whether the cap would apply to sole traders reporting business income and expenses;
The information provided in this article is general in nature and does not constitute tax advice. We recommend that you seek advice from your tax professionals.
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