The polls remain steady predicting a Labor win. But what will that mean for the tax landscape?
The Labor tax policy has been drip feed over the last 18 months or so and there is still some uncertainty about what will be implemented.
Increasing the top marginal rate
Under a Labor Government, the top marginal tax rate will increase from 45% to 47%. After adding the Medicare levy, this is an effective tax rate of 49% on earnings over $180,000 per annum.
Franking credits
Probably the most controversial of the changes proposed by Labor is to deny refunds of franking credits to individuals and superannuation funds. This measure is targeted at self-funded retirees and self-managed superannuation funds.
This raises several issues on many fronts but will a refund be denied if a taxpayer is entitled to a refund as a consequence of over-payment of PAYGW and the refund arises because of a component directly attributable to franking credits?
Negative gearing
Under a Labor government, investors will not be allowed to use net investment losses on existing properties to offset salary and wage income. New real property investments will be expressly excluded from this policy. We don't yet know from when this will apply, other than it will apply from a "date to be announced".
Presumably the policies will not apply retrospectively permiting the refinancing a grandfathered asset will still permit a taxpayer to offset the loss against other income sources.
Capital gains tax
Currently the CGT discount for assets held for more 12 months is 50%. The Labor Government proposes to reduce the discount to 25% making an effective tax rate for someone on the maximum marginal rate of 37%. The 50% discount continues for assets acquired before the effective date.
Superannuation funds remain unaffected and will continue to receive a one-third CGT discount.
Taxation of trusts
From 1 July 2019 Labor will introduce a standard minimum 30% tax rate for discretionary trusts for distributions to beneficiaries over 18.
Cap on deduction for tax affairs management at $3,000
Labor proposes to cap tax deductions for managing tax affairs to $3,000 for individuals, self-managed superannuation funds, trusts and partnerships. No word as yet if there will be an exception for small business.
Capital expenditure write off
The Coalition has recently proposed a increase on the cap of $25,000 for instant write-off of elligible capital expenditure. The ALP propose a 20% instant asset write-off for capital expenditure not exceeding $20,000 subject to certain eligibility criteria.
No more overseas holidays to tax havens
Travel expenses to known tax havens will be denied under a Labor government.
Labor will also include mandatory shareholder reporting of tax haven exposure requiring companies to disclose to shareholders as a "material tax risk" if a company is doing business in a tax haven.
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