Tax planning after the Federal election

The Coalition win at the Federal election alleviated some of the uncertainties associated with future tax planning. Below are several of the Federal government’s proposed tax changes which taxpayers should expect to come to law once they have passed through parliament:

  • First Home Loan Deposit Scheme: for eligible first home buyers (earning up to $125,000 for singles and $200,000 for couples) buying their first home (value of home capped) with a deposit as low as 5%, with the government guaranteeing up to 15% of their deposit, and saving on lenders mortgage insurance from January 2020;
  • July 2022 tax cuts: lifting the 19% income tax bracket from $37,000 to $45,000;
  • July 2024 tax cuts: Cutting the 32.5% tax bracket to 30% and removing the 37% tax bracket, ie, a flat 30% tax rate from $45,000 to $200,000;
  • Superannuation: no need to meet the work test for those near retirement aged 65 or 66 contributing money to their super funds from 1 July 2020; and
  • Private company distributions: defer Division 7A proposed changes for one year to 1 July 2020 with Treasury requiring further consultation. Fresh changes have been made and submitted with the Treasurer for his consideration.

Changes which have been enacted include:

  • Tax offset: where applicable, up to $1,080 (from $530) for low and middle income earners effective 1 July 2018 on lodgement of their 2019 individual income tax returns
  • Instant asset write-off: up to $30,000 for business turnover under $50 million.

The Coalition’s proposed tax policies are based on simplifying and fine tuning the tax system and delivering tax cuts for both individuals and businesses thus creating certainty and stability for families, businesses and the economy, in what is turning out to be tougher and challenging times.

Proposed tax polices which lapsed on 1 July 2019

The following proposed tax changes did not become law, as the Bills which were previously introduced to Parliament have since lapsed on 1 July 2019:

  • Removal of main residence capital gains tax exemption for foreign residents, including Australians living overseas who are foreign tax residents.
  • GST changes to include online hotel bookings of offshore suppliers (GST turnover is $75,000 or above) and not Australian suppliers only.
  • Superannuation Guarantee Amnesty, which was to provide employers with an amnesty during 24 May 2018 to 23 May 2019 for historical superannuation guarantee non-compliance.

Proposed superannuation tax changes re-introduced

The following self-managed superannuation fund tax measures were re-introduced into parliament on 24 July 2019:

  • Certain employees with multiple employers to apply for an employer shortfall exemption certificate which prevents their employer from having a superannuation guarantee shortfall if they do not make contributions for a period. This allows the employee to then negotiate with their employer to receive additional cash or non-cash remuneration.
  • Circumstances involving limited recourse borrowing arrangements, where the total value or a superannuation fund’s assets is considered in working out individual members’ total superannuation balances.

Key takeaways from the 2019 Federal election

  • Do not make impulsive tax decisions during an election period based on what might happen
  • Do not implement decisions until the tax legislation has been passed through parliament
  • Do seek out professional guidance for future tax planning requirements.

This article was co-authored by Bill Leung, HLB Mann Judd Melbourne.