By Roelof van der Merwe, National Tax Director, Findex
The election has come and gone, what now?
Following on from an earlier article The Australian tax landscape: Upcoming election and tax year-end planning, the Coalition has won the 18 May 2019 Federal election and has been returned to government with a majority (the Coalition won at least 76 of the 151 seats in the House of Representatives).
This means that:
- the Coalition should be able to pass Bills through the House of Representatives1, but may have difficulties in passing the Senate, and
- the Labor party’s tax proposals (eg no cash refunds of excess imputation credits, limit negative gearing, reduce the CGT discount from 50% to 25%, tax discretionary trust distributions at 30% and a $3,000 deduction cap on the cost of managing tax affairs) will not see the light of day (for at least the next 3 years).
Because of these developments, it’s timely to provide a brief outline of the tax changes we can most likely expect from the Coalition government in the near future.
Likely tax changes in the near future
The main tax changes the Coalition government may consider introducing into parliament will most likely originate from their previously announced proposals, namely:
- tax proposals in 2 April 2019 Federal Budget
- the backlog of earlier proposals and unenacted Bills that lapsed on 11 April 2019 when the election was called, and
- proposals made in the election campaign (ie after the Federal Budget).
Tax changes proposed in the Federal Budget
The table below provides a succinct summary of some of the main tax changes proposed in the recent Federal Budget.
|Individuals||1. Increase the low-and-middle income tax offset from $530 to $1,080 from 1 July 2018 |
2. Lower the 32.5% marginal tax rate to 30% from 1 July 2024
|SMEs||1. Increase & expand the instant asset write-off (already law) |
2. Defer the start date of the proposed Div 7A changes to 1 July 2020
|Large businesses||$1b to help Tax Avoidance Task Force investigate whether multinationals, large groups, trusts and high wealth individuals are paying their fair share of taxes|
|Superannuation||Enable those approaching retirement to put more money into their superannuation (eg from 1 July 2020, people aged 65 or 66 should be able to make concessional or non-concessional contributions (and use the 3-year bring forward rule) without having to satisfy the work test)|
The changes to the instant asset write-off are already law and are relevant for the 2019 income tax year (see More businesses can now qualify for an increased instant asset write-off). At the time of writing, it is uncertain whether parliament will be able to be reconvened to pass the increase to the low- and middle-income tax offset before 30 June 2019.
Tax proposals and Bills that lapsed when the election was called
Set out below is a timeline of some of the main proposals and Bills (and their proposed start dates) that lapsed when the election was called on 11 April 2019.
If the government chooses to proceed with the proposed changes expressed in the lapsed Bills, these changes will need to be re-introduced in new Bills.
New proposal made during the election campaign
On 12 May 2019, as part of the election campaign, the Liberal party proposed a First Home Loan Deposit Scheme that will help eligible first home buyers to purchase a house with a deposit as low as 5% (thereby potentially saving such taxpayers around $10,000 in lenders mortgage insurance). This scheme is proposed to complement the current First Home Super Saver Scheme.
Only time will tell whether the Coalition government will introduce all their tax ideas into parliament, and even if introduced, whether these will pass both Houses of Parliament before they can become law.
|1This is the lower house of the bicameral Parliament in Australia. For a Bill to become law it must pass both the House of Representatives (ie lower house) and the Senate (ie the upper house) and then receive Royal Assent (usually automatically given after the Bill has passed this parliamentary obstacle course).|