The Labour Party has proposed a number of tax measures under its ‘Fair Go Action Plan’ which will impact upon our clients should they be legislated. The measures include:
- Minimum 30% tax on discretionary trust distributions (i.e. family trust distributions)
- Removal of imputation credit refunds (with a pensioner guarantee)
- 49% top marginal tax rate for taxpayers with taxable incomes greater than $180,000.
- $3,000 cap on deductions for management of personal tax affairs
- Negative gearing restrictions for real estate and other passive assets (existing assets to be grandfathered)
- Reduction in the CGT discount from 50% to 25%
Unfortunately, whilst we can speculate about the impacts of these changes on our clients, we cannot provide client specific advice as the Labour Party has not provided sufficient information about the implementation of the policies. These details will not be known until the legislation is drafted.
Assuming Labour win the election and proceed with implementing these measures a number of our clients will need to consider their investment strategy (both within superannuation and outside of superannuation) and the structure of their business. If you are thinking about purchasing a negatively geared investment, you will need to pay close attention to the results of the election. Labour has said that the negative gearing and capital gains tax changes will not apply to existing assets. It is not anticipated that any legislation to introduce the changes to negative gearing and capital gains tax could be drawn up and passed by parliament before 30 June 2019 due to the complexity of the change and the time required for consultation. However, a Labour Government is likely to move on these changes within 12 months according to Labour Trades Spokesman Jason Clare.