4 May 2018

The Institute of Public Accountants (IPA) has analysed the tax policies as announced by the two major political parties and questions how it can be that we have such divergent views when it comes to tax.  

“We understand that next week’s Federal Budget is a pre-election Budget and by their very nature, Budgets and Budget replies are inherently political,” said IPA chief executive officer, Andrew Conway.

“However, there is too much at stake for political posturing when we have very real and growing expenditure pressures on the budget brought about by our ageing population and increasing tax complexity.

“We strongly encourage the parliament to put the national interest ahead of political interest and partisanship when it comes to tax

“The ‘tax-talk’ from both sides of politics is so divergent that the layperson has even less of an idea of what the tax system will look like if the changes come into force.  

“As a community, we need to give politicians the license to be bold when it comes to tax reform. A tax system built on simplicity and equity should be our collective goal. 

“We have kept track of the announcements to date:

Labor’s announced tax policies:

  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 of the income scale 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;
  10. Whistle-blower rewards for tax evasion; and
  11. Superannuation:
  • Oppose catch up contributions on concessional contributions and tax deductibility on personal superannuation contributions;
  • Lower annual non-concessional contribution cap to $75,000 and further lower high income super contribution threshold to $200,000; and
  • Increasing the Superannuation Guarantee to 12% when fiscal circumstances allow.

In contrast, the Coalition’s current tax policies (prior to the 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;
  3. No change to current arrangements regarding negative gearing of investment property;
  4. No change to the CGT discount which currently sits at 50% for individuals;
  5. No change to the current arrangements regarding trust distributions from discretionary trusts;
  6. No change to the current arrangements regarding imputation in particular, full refund of excess imputation credits; and
  7. 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. This may change on 8 May.

“Our key concern is that with the Budget just days away, we seem to be headed for more tinkering and less substantive tax reform. Either way, the Federal Parliament seems unwilling or unable to talk about holistic tax reform where the total tax mix is taken into consideration,” said Mr Conway.