Following a budget centred on ‘jobs and growth’ there’s little surprise that tax rates and business measures are among the biggest issues in this year’s Federal election.
However, as we reach the end of a long campaign trail, you’d be forgiven for losing sight of where Australia’s two largest parties sit on the key financial matters that will affect you and your business.
We’ve reviewed the literature and prepared a comparison of the core Liberal / National Coalition and Labor policies.
William Buck is not affiliated with nor has any allegiance to a particular political party.
|Corporate Tax Rate||The Coalition has proposed gradually cutting the corporate tax rate from 30% to 25% over the next 10 years.
This will take place in two stages. First dropping to 27.5% by 2023-24 then dropping to 25% by 2026-27.
|Labor does not support a cut to the corporate tax rate for businesses with a turnover of over $2 million.|
|Small Business Tax Rate & Definition of Small Business||From 1 July 2016, small businesses will see their tax rate drop by 1% to 27.5%.
The Coalition is also calling for the term ‘small business’ to be redefined as having turnover of less than $10 million, five times the current level of $2 million.
|Labor supports the tax cut for Small Business but does not wish to see a change to the definition of ‘small business’.|
|Multinationals||Earlier this year, the Coalition introduced a number of measures aimed at cracking down tax avoidance by multi-nationals including:
– The Multinational Anti-Avoidance Law (MAAL) designed to prevent companies from operating in Australia and billing overseas.
|Labor’s policies to ‘shut down the loopholes’ allowing multinationals to shift profits overseas include:
– Changes to rules for multinationals claiming deductions
|Personal income rates||Both the Coalition and Labor have agreed to increase the threshold for the 37% income tax rate from $80,000 to $87,000.|
|Budget Repair Levy||The Coalition has stood by its intention to cease the Temporary Budget Repair Levy on 1 July 2017.
Introduced on 1 July 2014, the temporary measure imposes a 2% levy on individuals with taxable income of over $180,000.
|If elected, Labor will extend the Temporary Budget Repair Levy|
|Negative Gearing||The Coalition has declared that they will not touch negative gearing.||A Labor Government will confine negative gearing to new housing from July 2017.
Current investments and any investments made before that date would be fully grandfathered.
|Capital Gains Tax (CGT)||Under a Coalition Government, the current CGT legislation will remain unchanged.||Labor has proposed cutting the Capital Gains Tax discount from 50% to 25% from 1 July 2017 (residential homes will continue to be CGT free).|
In his 2016-17 Federal Budget, Scott Morrison introduced a raft of superannuation changes, below are the key changes and Labor’s responses.
For a more comprehensive breakdown of the Coalition’s superannuation measures please refer to our Federal Budget Summary.
|Increased tax for high-income earners||Both the Coalition and Labor plan to increase the tax on contributions for those earning more than $250,000 a year, from 15% to 30%.|
|Non-concessional Contributions||As announced in the Federal Budget, the Coalition has proposed that a lifetime limit of $500,000 be placed on non-concessional contributions.
The measure as announced will include all non-concessional contributions from 1 July 2007 in the lifetime limit.
|No changes announced|
|Concessional Contributions||From 1 July 2017, concessional contributions are proposed to be limited to $25,000 per annum.
Current annual limits are:
|No changes announced|
|Superannuation income in pension phase||Superannuation earnings for retirees in the pension phase are currently tax-free.
The Coalition proposes to introduce a cap of $1.6m on the total amount of accumulated superannuation an individual can transfer into the tax-free pension phase from 1 July 2017.
Members already in the pension phase with balances above $1.6m will be required to reduce their pension balance to $1.6m by 1 July 2017 with the excess being held in an accumulation phase account.
If legislated, any funds in excess of $1.6m will be taxed at 15% (the same concessional rate as applied in the accumulation phase).
|Superannuation earnings for retirees in the pension phase are currently tax-free.
If elected, Labor has said they will tax earnings above $75,000 at 15% (the same concessional rate as applied in the accumulation phase).
|Low Income Super Offset||The Coalition has proposed the introduction of a low income super offset to reduce the tax on concessional superannuation contributions for low income earners.
The measure, effective from 1 July 2017, will provide a non-refundable tax offset of up to $500 to super funds of income earners with an adjusted taxable income of $37,000 or less.
|No changes announced|