Over the election campaign period, we have had many enquiries from clients about the impact of each party’s policies. Politics aside, we have prepared a summary of the issues that were of most concern to our clients and what the election result means for them.
There are many other implications from the election that are not financial that we haven’t commented on but rather have focused on the issues that were of most concern to our clients.
In the April budget, the government had proposed the following changes to income tax which were dependent on them winning the election
The Low and Middle income tax offset (LMITO) increases from $530 to $1,080, starting from this current financial year.
From 1 July 2022, the top threshold of the 19% tax bracket will increase from $41,000 to $45,000 and the low income tax offset (LITO) will increase from $645 to $700.
From 1 July 2024, the 32.5% tax rate will reduce to 30%.
This was a hugely controversial issue and was set to impact many retirees. There will be no changes to the Franking Credit system resulting in many retiree’s retaining their current level of income and not losing their franking credit refunds.
Capital Gains Tax and Negative Gearing
The Labor Party’s proposed changes to Capital Gains Tax, Negative Gearing and Discretionary trust tax will not go through. These proposed changes would have negatively affected investors and small businesses.
From 1 July 2020, Australians aged 65 and 66 will be able to make voluntary superannuation contributions even if they do not meet the current work test requirement to work at least 40 hours over a 30-day period in the year they seek to make contributions
Labor’s proposed reduction in Non-concessional contributions (after tax contributions) from $100,000 to $75,000 will not occur. Similarly Labor’s proposal to drop the ‘catch up’ provisions for concessional contributions will not occur. This will allow you to carry forward unused concessional contribution caps that have not previously been used, starting from next financial year.
Both parties promised to introduce a First Home Loan Deposit Scheme, making it easier for first home buyers to buy a home with a smaller deposit. First-home buyers will need to save at least 5% and the government will underwrite any shortfall up to 20% of the value of the property. Otherwise, most lenders are requiring mortgage insurance for home loans that represent more than 80% of the home value. This will mean that eligible first home owners may be able to buy their first home sooner than they otherwise would, and they wont have to purchase mortgage insurance saving several thousands of dollars.
If you have any questions, or would like to the discuss what the election result means for you, please call us on (03) 9671 4550.