With the ‘ink’ barely dry on this week’s Federal Budget and an election looming, it is evident that tax policy and economic management is set to be a major factor as the ‘battle lines’ are drawn. 

The Government’s platform, as emphasised throughout the Treasurer's Budget Speech (2 April), is clearly about strong economic management ‘without increasing taxes’ which will no doubt be a key point of note in the Coalition’s election campaigning. 

With a Federal election likely to be held in less than six weeks, the question many are asking is ‘how does the Federal Opposition’s own economic management and tax policy contrast with the Government’s’ ?''

An Opposition Leaders Budget Reply Speech, as delivered by the Honourable Bill Shorten MP on Thursday evening (4 April), has never been received with so much interest.  In his speech, Mr Shorten made several bold and sweeping promises for what an ALP Government would do if elected.

In this Tax update, we compare the key aspects of the Coalition’s Budget and the Opposition’s ‘Shadow’ budget to provide a greater understanding of the post-election economic and tax landscape should there be a change of Government.

 

Coalition

ALP

Individuals – Tax Cuts
  • Tax relief for 10 million workers earning up to $126,000 a year;
  • Up to $1,180 tax relief for workers earning up to $90,000;
  • 37.5% tax bracket to be abolished;
  • 94% of workers to pay no more than 30% tax for every dollar earned from 2025.

 
  • Higher income tax breaks for those earning $45,000 and below;
  • Will match the Coalition’s tax cuts for those earning $48,000 - $126,000;
  • Won’t abolish the 37.5% tax bracket.

SMEs
  • Businesses with turnover of less than $50m entitled to immediate deduction for depreciating assets costing less than $30,000.

 
  • Measure supported.

Negative Gearing
  • No change – negative gearing on investment properties to remain in its current form.

 
  • Negative gearing on investment properties to be limited to:
  • new construction; and
  • properties held prior to introduction of law.

Refundable Franking Credits
  • No change – excess franking credits will be refunded to shareholders.

 
  • Excess franking credits will no longer be refundable.

Capital Gains Tax (CGT) Discount
  • No change – CGT discount remains at 50% where the asset held by an individual or trust for greater than 12 months.

 
  • Reduction in CGT discount from 50% to 25% where asset held by an individual or trust for greater than 12 months.

Health
  • $1.3b over 7 years to upgrade Australia’s health and hospital system;
  • More medicines added to the Pharmaceutical Benefits Scheme (PBS);
  • $229.9m over 7 years to improve community mental health services.

 
  • $2.3b package to cut out-of-pocket costs for cancer patients, including funding for 6 million free scans and 3 million specialist consultations;
  • All drugs recommended by independent experts for the PBS will be listed.

 

Education
  • $453m to extend funding for 15 hours of preschool per child for a further 12 months;
  • New scholarships for more than 1,000 students a year to study regionally;
  • Local school community program to provide library, playground and other infrastructure upgrades.

 
  • An additional $14b over 10 years for school funding;
  • 200,000 additional University places and $1b for TAFE and apprentices.

 

Welfare
  • $528m for a Royal Commission into the disability sector;
  • One-off Energy Assistance payment to welfare recipients;
  • Cashless debit card trial to be extended for a further 12-month period.
  •  
  • 250,000 new homes in an affordable housing package;
  • $2,000 payment to families looking to install solar battery storage systems;
  • Removal of the ‘cap’ on staff for the National Disability Insurance Agency.

 

Infrastructure
  • 10-year infrastructure package increase from $75b to $100b;
  • $3b boost to the Urban Congestion Fund;
  • $2b towards Melbourne to Geelong fast rail project, $100m for regional airports, $2.2b for road safety.
  • Plans and projects ‘ready to go’ across the country including $1.5b upgrades to Brisbane’s Gateway Motorway and the next stage of the Bruce Highway upgrade;
  • 1 in every 10-people hired for a Commonwealth infrastructure project must be an Australian apprentice.

 

Budget Surplus
  • $7.1b surplus by 2019-20;
  • Net debt eliminated by 2030.
  • Stronger surpluses, but no figures provided;
  • No date set for eliminating net debt.

 

 

It is clear that, if elected, the ALP’s over-arching management of the economy will be driven by a tax policy that aims to ‘redistribute’ wealth from those perceived to be able to afford it to those that can’t through limiting negative gearing, reducing the capital gains tax discount and removing franking credit refunds.  This is in stark contrast to the Coalition's mantra of ‘without increasing taxes’ whilst stimulating the economy through health and infrastructure measures - we will watch the political landscape with interest.

 

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