Updated: Aug 5, 2019
Labor’s reply to last week’s Federal Budget is worth a review, because Shadow Treasurer Chris Bowen has told the ABC that if Labor win the upcoming election, they will issue a new Budget in the third quarter of this year.
There are some measures in the Budget that Labor supports, and others that they don’t, which has implications for all taxpayers if they win the election. Here’s a summary of the key differences.
Individual income tax
The government announced in the Budget that the Low and Middle Income Tax Offset (LMITO) will increase immediately to a new maximum of $1,080 (from the current level of $530) for all taxpayers earning a taxable income between $48,000 and $90,000. Those earning less than $48,000, or between $90,000 and $126,000, will be entitled to a partial LMITO.
Labor has responded by saying that they support the increase to LMITO, but that they will enhance the full $1,080 to all taxpayers earning between $48,000 and $126,000 (not just for those earning up to $90,000).
However, Labor has refused to support a reduction in the 32.5% tax bracket (for people who earn $45,000 to $200,000 per year) that the government announced in the Budget. Treasurer Josh Frydenberg declared that the tax rate for this bracket will be reduced from 32.5% to 30% from the 2024/2025 financial year, projecting that 94% of taxpayers will pay no more than 30% tax because of this change. But Labor leader Bill Shorten has claimed that it’s unfair for someone earning $50,000 to pay the same tax rate as someone earning $200,000.
In his Budget reply speech, Bill Shorten reiterated Labor’s previously announced plan to abolish negative gearing for people buying established investment properties if the ALP wins government. Negative gearing will only be allowed on new properties if Labor wins the election and implements their policy. However, this change won’t be retrospective, meaning people who already negatively gear established investment properties will continue to be able to do so.
Other Labor tax policies
Shorten made no mention in his speech of Labor’s other previously announced tax policies, which include:
abolishing the ability of individuals (except pensioners) and super funds from generating cash refunds from the Australian Taxation Office via using franked credits received on share dividends.lowering the capital gains tax (CGT) discount from 50% to 25%.raising the top marginal tax rate from 45% to 47% (excluding the Medicare levy) for Australians with a taxable income of more than $180,000 per year.
How we can help
No matter whether Labor or the Coalition wins the election, it makes sense to plan your financial future and structure your investments tax-effectively.
At Create and Protect Financial Planning, we can help you to do that. We’ll take the time to understand your needs and goals so that we can provide you with the best possible advice.