Labor has said that if they win the election they will focus on cutting tax concessions and closing loopholes which will save the economy over $154 billion over 10 years.
Part of this will be done with a temporary budget repair levy of 2% on incomes above $180,000. This will remain in place until the budget surplus has reached 1% of GDP.
They will also focus on multinational tax avoidance which includes a 19 point policy aimed at recapturing about $600 million per year.
They will also limit negative gearing on investments from January 2020, they will not be removing negative gearing completely. Labor’s reforms around negative gearing (and the capital gains tax discount) would boost the budget bottom line. The budget’s bottom line would be raised about $32.1 billion over 10 years. This would also stabilise the economy by encouraging investors to chase rental yields rather than capital gains.
Labor also said a Shorten Labor Government will deliver better tax cuts for 3.6 million working Australians.
Labor says 10 million Australians will get the same or a bigger tax cut from 1 July 2019.
Under Labor’s changes, which will apply from the 2018-19 financial year, workers earning up to $37,000 a year will receive a tax cut of up to $350. For workers earning between $37,000 and $48,000 a year, the value of the offset will increase up to the maximum offset of $1,080.
A retail worker on $35,000 a year would get a tax cut of $255 a year under the Liberals, compared to $350 in Labor’s plan.
A part-time nurse on $40,000 a year would get a tax cut of $480 a year under the Liberals, compared to $549 in Labor’s plan.
Australia has a two-class tax system where some people have the financial means to access generous deductions and subsidies to lower their tax, and others do not.
Trusts can be legitimately used by individuals and businesses for several reasons, including asset protection. However, discretionary trusts also have attractive tax advantages and are used by high-wealth individuals to minimise their tax obligations.
The practice of “income splitting” through discretionary trusts is used frequently by wealthy Australians to minimise their tax.
Labor’s policy is targeted to address tax minimisation through income splitting. These reforms will not affect 98 per cent of all individual taxpayers in Australia.
Labor’s policy will only apply to discretionary trusts. It will not apply to non-discretionary trusts, including:
- Special disability trusts.
- Testamentary trusts (Deceased estates).
- Fixed trusts.
- Cash management unit trusts.
- Fixed unit trusts.
- Public unit trusts (listed and unlisted).
Labor’s policy will also not apply to:
- Farm trusts.
- Charitable and philanthropic trusts.
- The policy will come into effect on 1 July 2019.
This policy will save around $7.7 billion over the forward estimates.