Third consecutive win for the Coalition: What does it mean for everyday Australians?
Last Saturday’s federal election saw The Coalition under Prime Minister Scott Morrison stage one of the most unexpected election wins, defying pollsters and pundits alike, terminating the career of Bill Shorten, and sending the Labor Party back to the drawing board.
In reaction to the unexpected win, the local share market rallied on Monday morning, posting its best gain in 15 weeks, as investors responded positively to the removal of uncertainty and the elimination of the threat of Labor’s less business-friendly policies.
PM Scott Morrison announced his new cabinet yesterday, drawing sharp new priorities for his government by elevating the National Disability Insurance Scheme into cabinet as a stand-alone ministry, reintegrating the climate and energy portfolios and creating a federal agency to improve public service delivery.
But what exactly does the Coalition’s win mean for everyday Australians, small business owners and investors? In this article, we will summarise a number of key tax policies that have already been approved, may be approved, and will not be looked at under the Liberal government:
What’s been legislated already?
- Cut in Company Tax Rates: Base Rate Entities (BRE) with turnover of less than $50m will see the company tax rate drop from 27.5% in FY19 and FY20, to 26% in FY21 and 25% in FY22. All non-BREs will continue to have a 30% tax rate.
- Business Asset Write-Offs: The $30k immediate deduction for assets purchased by 30 June 2019 is in place for all businesses with a turnover of under $50m for FY19.
What is high on The Coalition’s agenda to be implemented?
- Low and middle income tax cuts: Proposed in The Coalition’s April budget, this offset is expected to be the first Bill to be introduced to parliament as Labor has proposed an almost identical policy. It includes a tax offset of up to $1,080 for those on FY19 incomes of less than $90k, phasing down for those on incomes between $90k and $126k. This incentive should provide immediate tax relief for low and middle income earners.
- Personal income tax rate cuts: Also included in the April budget, the Government will look to abolish the 32.5% and 37% tax brackets from FY25 – effectively meaning individuals with and income between $45k and $200k will all be in the 30% tax bracket. Given that we have another election before that, it’s unclear if this legislation would come into effect as proposed.
- Increase in SMSF member numbers: from 4 to 6 may be re-introduced into Parliament, allowing more family members or business partners to share in one SMSF structure. We will keep an eye on this one.
- Division 7A legislation re-write: was underway in late 2018 with a proposed start date of 1 July 2019, which has been deferred. We expect further detail on this in coming months and will follow it closely as it will have a significant impact on the SME sector.
What policies are off the table the time for the time being?
- Labor’s removal of refundable franking credits policy: The Coalition has confirmed that it has no plans to change the current system that allows for the refund of excess franking credits – very good news for equity SMSF investors – especially in retirement!
- Tax on discretionary family trust distributions: The Government has confirmed that it has no plans to change the current system which requires beneficiaries of discretionary trust income to pay tax on that income at their own marginal tax rate.
- Negative Gearing: No changes to the current system which allows for losses incurred in e.g. a share portfolio or rental property to be offset against other income, i.e. employment income or rental income – meaning investors will continue to be taxed on net income. Another big win for negatively geared investors!
- Changes to 50% CGT discount: There will be no changes to the 50% discount to the gross capital gain when an asset is sold and tax on the net taxable gain will continue to be paid at the individual’s marginal tax rate.
As always, should you have any concerns or wish to discuss the impact of any of above on your personal situation, don’t hesitate to get in contact with us or your financial adviser / accountant.
Important Information and Disclaimer
MK Wealth Solutions is a Corporate Authorised Representative No 100223 of Synchron ABN 33 007 207 650 AFSL 243313. The information provided in this article has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your personal financial adviser before you make any decision regarding any products mentioned in this article. Whilst care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither MK Wealth Solutions and Synchron, nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.