The two major political parties are foreshadowing divergent tax changes but it will be left to tax agents who fully understand the implications to advise their clients on what it all means, according to the Institute of Public Accountants (IPA).

“The upcoming tax season will be the last opportunity for our members before the next election to communicate what these policy changes will mean for their clients, so we want them to explain the ramifications of what is proposed for informed decision making,” said IPA chief executive officer, Andrew Conway.

Labor policies mentioned so far:

  1. A restoration of the company tax rate to the full 30% coupled with a possible lower rate for smaller corporate entities with turnover less than $2M;
  2. Higher personal tax rates at the top end and lower personal tax rates at the lower end;
  3. An increase in the Medicare levy to 2.5% coupled with a more generous Medicare levy arrangement for lower paid workers than currently available;
  4. A prohibition on negatively gearing investment properties other than newly built investment properties;
  5. A halving of the capital gains tax (CGT) discount to 25% for individuals;
  6. A minimum tax of 30% on all distributions from discretionary trusts;
  7. A denial of any refund in respect of excess imputation credits;
  8. A new deduction (the Australian Investment Guarantee) which will enable a 20% deduction in respect of the purchase of any new eligible asset worth more than $20,000;
  9. Capping of deductions for managing tax affairs to a maximum of $3,000; and
  10. Whistle-blower rewards for tax evasion.

In contrast the Coalition current tax policies (prior to May Budget) are:

  1. A reduced corporate tax rate for all companies eventually with a target rate of 25%;
  2. A likely reduction in personal tax rates particularly for income levels up to $100,000 – the exact details are unknown but should become clearer after the May 8 budget;
  3. Apart from the already announced increase to the Medicare levy to 2.5% no further change in current arrangements;
  4. No change to current arrangements regarding negative gearing of investment property;
  5. No change to the CGT discount which currently sits at 50% for individuals;
  6. No change to the current arrangements regarding trust distributions from discretionary trusts;
  7. No change to the current arrangements regarding imputation in particular, full refund of excess imputation credits; and
  8. No changes in relation to depreciation - the $20,000 immediate asset write-off available to 30 June 2018 is not currently being extended by the Coalition. That may change in the May 8 budget.

“Our key concern is that none of the political parties are talking about holistic tax reform where the total tax mix is taken into consideration. Without bold and all-encompassing reform we will still be drowning with a raft of inefficient taxes which stifle growth,” said Mr Conway.