Proposed Election Changes To Tax And How They Will Effect You.
As we are coming closer to the election and a possible new government many clients are asking us about the proposed tax changes that the Labor party are proposing.
The first question is typically - how is it going to affect me? The answer obviously depends on your personal financial situation.
So what are the proposed changes?
- non refund of franking credits from 1/7/19 - this will affect self managed super funds and individuals except those who received the age pension pre 28/3/18
- reducing the capital gains discount from 50% to 25% - this will affect anyone owning property or shares other than a company tax payer who currently doesn't get the CGT discount (1/1/20)
- taxing trust distributions at 30% to adults - individuals who split income with their spouses
- changes to negative gearing from 1/1/20
- a range of superannuation changes -once again! These will potentially affect everyone.
The super changes include:
- reducing the non concessional super cap from $100,000 pa to $75,000pa
- re-introduce the 10% rule that limits people on salary and wages from claiming super contributions
- abolish the 5 year catch up opportunity for claiming super contributions
- abolish the ability to borrow in super to buy properties
- lower the threshold to $200,000 for the Div 293 tax which taxes an extra 15% on super contributions
- increase super guarantee to 12%
We are currently still trying to bed down the Liberal changes in 2017 to superannuation with the $1.6m cap and changes to contribution limits.
So you now ask - what should we do?
The answer is - nothing at present. Let's see what they can actually bring in if they are elected into government.
Remember they have to get elected first. Then they have to produce the legislation and get that unaffected through the two Houses of Parliament which will be difficult because they may not to control both houses and will probably have to do some deals.
Once we know what is actually happening then LBW will be on the front foot as we were when the Liberal changes came through. We will advise our clients of the impact of the Labor changes and provide the options available to them to ensure minimal impact.
If you would like to discuss your personal taxes, please contact us