Date posted: 21/05/2018 5 min read

Tax Time 2018 will give accountants a chance to compare impact of tax policies for clients

The Coalition has revealed its long game on much-needed personal tax rate reform, and Labor has responded with a larger tax cut in the short term for low to middle income earners.

There will be much to talk about when Australians visit their accountant to discuss their 2018 personal tax return, according to Chartered Accountants Australia and New Zealand (CA ANZ).  

At today’s CA ANZ Strategic Tax Planning Day 2018, the consensus amongst participants was that the tax policies of the major parties for the next Federal Election have been largely revealed, and taxpayers are now in a unique position to compare the impact proposed changes will have on personal tax calculations.  

The Coalition has revealed its long game on much-needed personal tax rate reform, and Labor has responded with a larger tax cut in the short term for low to middle income earners.  

CA ANZ’s Australia Tax Leader, Michael Croker, highlights other key tax policy differences.  

“With capital gains tax, the Coalition says it will keep the 50 per cent discount whereas Labor would halve it. That’s an important consideration in deciding what to sell, and when, once the election outcome is known,” Croker said.

“Negative gearing deductions stay under the Coalition, but would be removed on a prospective basis by Labor for investors buying established homes. Some clients will want to chat about real estate investments.  

“Chartered Accountants have been fielding plenty of questions about Labor’s plan to eliminate franking credit refunds for individuals and self-managed superannuation funds receiving dividends from Australian companies.  

“CA ANZ’s Head of Superannuation Tony Negline, noted franking credit refunds have been available for dividends paid since 1 July 2000 and had been baked into investment and retirement planning ever since.  

“Come tax return time this year, it will be relatively easy for an accountant to prepare a hypothetical tax calculation which explains in after-tax terms what happens if the refund disappears from an individual or SMSF return. The conversation will then turn to franking credit maximisation if refunds are denied.  

“Mr Negline also noted Labor’s ‘pensioner guarantee’, and said advisers would explore who amongst their clients could be eligible.  

“However uncertainty surrounds a number of other tax policies. Chartered Accountants have many concerns about the design and operation of Labor’s proposed 30 per cent minimum tax on discretionary trust distributions.  

“Members would also point out to clients the unfairness of Labor’s proposed $3,000 cap on the deduction individuals can claim for tax agent fees.  

“Tax law is complex, and there are many situations where fees can exceed $3,000. Tax disputes with the Australian Taxation Office (ATO) can be a David vs Goliath struggle. Fees also rack-up in various situations, such as relationship breakdowns, starting a small business, termination of employment and where complex tax calculations are required.  

"It would also be useful for Labor to outline a model for how it will design, develop and implement its more complex tax reform measures, should it be elected.  

“On the Coalition side, the Federal Budget will start many conversations, especially around the Black Economy measures and particularly their impact on small business.  

“Chartered Accountants are disappointed political agreement on a single company tax rate has not yet been achieved.  

“A two-rate company tax regime complicates an already complex tax system. It would be good to get bi-partisan agreement that companies with $50 million turnover are eligible for the lower rate.  

“All sides of politics need to at least find common ground on tax simplification, particularly in acknowledged areas of complexity where compliance costs were high for individuals and small business.  

“For example, why not green light a ‘sand-pit’ design project and see what talented people – drawn from both the public and private sector – can come up with to simplify Fringe Benefits Tax?”  

“If work-related deductions are such a concern for the ATO, why not offer individuals an alternative such as a personal allowance and eliminate the need for most Australians to lodge personal tax returns?”

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