Tax policies

The Australian Labor Party has an ambitious tax and superannuation reform agenda which it has published in stages over recent years.

ALP modelling suggests that most of the revenue raising measures impacting individuals will affect mainly high income earners, a claim which the Coalition contests in policy areas such as negative gearing and franking credit refunds.

Business tax reforms are largely designed to increase tax transparency and reduce gearing deductions claimed by multinationals against the Australian tax base. Labor's proposed Australian Investment Guarantee has been well-received by the business community because it caters for large capex outlays as a permanent measure (as distinct from the current $30,000 threshold for the temporary instant asset write-off for businesses with a turnover less than $50 million).

Measures impacting individuals (directly or via partnerships and trusts)

• Removal of imputation credit refunds
  • Background Paper
    
    
• A 30% minimum tax rate on discretionary trust distributions to adult beneficiaries
  • ALP Background Paper
  • CA ANZ's questions about ALP's policy: Why no carve out for active small business? (Part 1)
  • CA ANZ's questions about ALP's policy: Testamentary, disability and charitable trusts etc (Part 2)
  • CA ANZ's questions about ALP's policy: Flow through issues (Part 3)
  • CA ANZ's questions about ALP's policy: Stranded assets, stranded beneficiaries and restructuring relief (Part 4)
• To ensure certain trusts cannot be used by multinationals and high wealth individuals to avoid paying their fair share tax by making distributions to people overseas, the tax treatment of distributions from certain fixed trusts to non-residents will be aligned with tax treatment of distributions from companies and public unit trusts
• Personal tax cuts targeted at low to middle brackets
  • Support the 2019-20 Budget announced increase to the maximum amount of Low and Middle Income Tax Offset (LMITO) from $530 to $1,080 but increase the base amount of LMITO to $350
  • Will not support the 2019-20 Budget announced flattening of tax in the future, ie. 2024-25 reduction of the 32.5% marginal tax rate to 30% and legislated abolition of the 37% tax bracket
• $3,000 cap on deductions for management of tax affairs (e.g. tax agent fees)
  • Chartered Accountants ANZ's arguments against this policy (Michael Croker Opinion Piece)
• Beneficial ownership tracing: establish a publicly accessible central registry (companies and trusts)
• Require disclosure to ATO of residency or citizenship of other countries

Measures impacting business

• Australian Investment Guarantee (AIG) (20% capital allowance write-off in Year 1)
• • By supporting the Government's decision to accelerate the reduction of corporate tax rates for SMEs, ALP will delay the introduction of the AIG by 12 months to 1 July 2021
• As part of ALP's National Electric Vehicle Policy, ALP will allow businesses an upfront tax deduction to purchase electric vehicles for business purposes, as part of the Australian Investment Guarantee. Businesses will be able to immediately deduct 20 per cent depreciation for electric vehicles valued at more than $20,000 as part of private fleets
• Debt deductions - Eliminate safe harbour and arm's length debt test in the thin capitalisation rules and have a single test (world-wide gearing ratio)
• Public disclosure of country-by-country (CbC) lodged by significant global entities (SGEs)
• Mandatory shareholder reporting of tax haven exposure (changes to Corporations Act 2001)
• Introduce a Tax Haven Black List to vet investments from notorious tax havens. Companies that operate out of these tax havens will be prevented from engaging in tax avoidance activities in Australia
• ATO's tax transparency reports: reduce threshold for reporting for private companies to $100 million
• Deny tax deductions for travel to tax havens
• Deny tax deductions by significant global entities for certain royalty payments
• Review embedded royalties
• Change program objectives of the R&D Tax Incentive scheme so that improving Australian business collaboration with research institutions will be an explicit target. Firms that collaborate with researchers in universities and public research agencies to create new knowledge will be eligible for a 10 per cent premium. In addition, Labor will undertake a root and branch review of Australia’s research sector. Measures impacting ATO administration

Measures impacting ATO administration

• ATO's annual report to disclose number and size of tax settlements
• Increased compliance funding

Other tax-related measures

• GST distribution: Western Australia fair share fund (70 cent in the $ floor)
• Board of Taxation: community sector representative to be appointed
• Whistle blower laws: rewards for whistle-blowers up to $250,000
• Public reporting of AUSTRAC international funds transfer data
• Government contracts: tax domicile disclosure for all firms tendering for Government contracts worth more than $200,000
• Increase penalties for individuals and entities promoting tax evasion and avoidance
• Funding 10 free tax clinics to provide assistance with administrative tax matters to low income taxpayers and microbusinesses (this policy is slightly different to the Government's version)
  • To commit $4 million over next 4 years
• Provide $5million a year to Tax Inspectors Without Borders with a portion of that funding assisting the ATO to send tax experts to developing countries who request help
• Amend the Charities Act and the Australian Charities and Not-for-profit Commission Act 2012 to clarify the public benefit of advocacy as a charitable purpose

Superannuation policies

Policies are taken from April 2018 draft ALP National Platform:

• Non-concessional cap to be reduced to $75,000 (currently $100,000)
• Income threshold for the extra 15% contributions tax for high income earners to be lowered to $200,000 p.a. (currently $250,000 p.a.)
• Abolish catch-up concessional contributions
• Deductibility of personal contributions for employed persons to be removed
• Committed to low income superannuation tax offset
• Borrowing by SMSFs to be prohibited
• Superannuation Guarantee coverage to be expanded to include both parental leave and salary and wages of less than $450 per month
• Increase in the Superannuation Guarantee rate to 12% ahead of the current timetable "when prudent"
• Develop guidelines for tax haven investment by superannuation funds