Our last newsletter included a comparison of the Coalition and ALP tax and superannuation policies. With the election now well and truly over, we thought we’d put together a quick summary of what the Coalition win means tax wise.
Low and Middle Income Tax Offset (LaMITO)
The LaMITO was proposed to increase from 1 July 2018 as follows:
|Taxable Income||Current LaMITO||Proposed LaMITO|
|Up to $37,000||$200||$255|
|$37,001 to $48,000||$200 plus 3c for every dollar above $37,000||$255 plus 7.5c for every dollar above $37,000|
|$48,001 to $90,000||$530||$1,080|
|$90,001 to $125,333||$530 minus 1.5c for every dollar above $90,000||$1,080 minus 3c for every dollar above $90,000|
|$125,334 and above||Nil||Top threshold increased to $126,000 before it cuts out|
This would effectively increase the tax free threshold for those under 65 to $21,884. For those over 65, the effective tax free threshold will be $33,621 for single people, and $29,783 each for those that are married.
The government has now legislated this change and the payments will be received in the 2019 assessments. This has led to an 80% increase in the number of returns already lodged at this time of year compared to the same time last year.
Changes to Thresholds and Rates
The Coalition proposed increases in tax thresholds and cuts to tax rates, some of which will start from 1 July 2022. Ultimately, by 2024/25 they propose that the top marginal rate of 45% will only apply to those earning over $200,000, and for the bracket earning between $45,000 and $200,000, a tax rate of 30% will apply. While holding a majority in the House of Representatives, they will need to negotiate with the crossbench to pass this proposal through the Senate.
Instant Asset Write-off threshold
The proposal to increase the threshold for instant asset write-off from $25,000 to $30,000, and extending it to businesses with a turnover of up to $50 million (previously only applied to businesses with turnover up to $10 million) was passed into law prior to the election, and applies for assets acquired from 2 April 2019 until 30 June 2020.
Luxury Car Tax Refunds for Primary Producers and Tourism Operators
For vehicles purchased from 1 July 2019, the Coalition proposes that eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid up to a maximum of $10,000 (up from the current amount of $3,000).
Removal of the work test and extension of the Bring-forward cap for some taxpayers
From 1 July 2020 the Coalition propose that people aged 65 and 66 will not need to satisfy a work test to be able to make superannuation contributions. Under current rules they can only make contributions if they work a minimum of 40 hours over a 30 day period. Those aged 67 to 74 would still be subject to the current rules.
From the same date, those people will also be able to make up to three years’ worth of non-concessional contributions. By doing this, they can contribute up to $300,000 of non-concessional contributions in a single year.
Increase in age limit for spouse contributions
From 1 July 2020, the Coalition propose that the age limit for spouse superannuation contributions will be increased from 69 to 75 years. The contributing spouse is eligible to claim a spouse tax offset of up to $540.
Simplifying Superannuation Fund Reporting
From 1 July 2020, the Coalition propose that superannuation funds will be able to choose their preferred method for calculating exempt current pension income (ie the component of income of the Fund that is not subject to tax). The requirement for a superannuation fund that is 100% in pension mode to obtain an actuarial certificate will also be removed.
First Home Buyers Guarantee
As part of their campaign launch a week before the election, the coalition committed to introducing a scheme to guarantee the difference between a 5% deposit and the 20% that would otherwise be required to avoid mortgage insurance. The scheme is proposed to apply to single first home buyers with income up to $125,000, or couples with income up to $200,000.
Key Proposals you Don’t Have to Worry About
With the ALP failing to win government, their key policies will not be implemented. These included:
- Denial of imputation credit refunds;
- Reduction in the CGT discount from 50% to 25%;
- 30% minimum tax rate for distributions to adult beneficiaries;
- Removal of negative gearing.