Caitlin Mason  is a Financial Adviser who specialises in social welfare payments provided by Commonwealth Government of Australia. Caitlin can be contacted via email

Caitlin Mason is a Financial Adviser who specialises in social welfare payments provided by Commonwealth Government of Australia. Caitlin can be contacted via email

19 MARCH 2019

With an early federal budget scheduled for April 2nd and a federal election likely to be held in May, we can expect a lot of talk in the media around the proposed changes to superannuation and tax. In this article Caitlin presents a summary of the Labor government’s proposed polices to save money for the Federal budget. In total these are projected to save $26bn over four years.

An important term to understand when reading the proposed polices is ‘grandfathering’. This is a term used when to describe what happens when a new legislation or policy is introduced. If a policy is ‘grandfathered’ it means that all people who were eligible under a policy before the changes took effect will continue under the old rules, and people who become eligible after the change date will be subject to the new rules. As you will see below some of the Labor policies are grandfathered and some are not.

The implementation date for these policies is not known and it will depend on a number of factors, the obvious one being Labor needing to first win the election, the final makeup of the House of Representative and Senate, and Labor’s priorities for introducing and passing legislation one in power.

Capital Gains Tax (CGT)
When an asset is disposed after being held for longer than 12 months the current CGT discount is 50% and the proposed policy reduces this discount to 25%. This proposal is grandfathered, meaning it only applies to assets purchased after the implementation date. 

Personal Tax Rates
For the higher income earners, Labor intends to increase the marginal tax rate from 45% to 47% (excluding the Medicare levy).  This will impact people who earn above $180,000 pa.

Negative Gearing
Labor intends to remove the ability for people to negatively gear property investments. The policy will be grandfathered and will not apply to new build houses purchased as investment properties. 

Franking Credits
This is the proposal getting the most attention as it will affect a lot of retired Australians.  Labor proposes that after 30 June 2019 franking credits will no longer be able to result in a tax refund. Franking credits will be able to continue to reduce tax to nil, but no refund will apply.  Importantly some people will be exempt, including those in receipt of the aged and disability support pensions.

Taxation of trust distributions
Trusts are often used to distribute funds to non-working spouses and young adult children who earn little or no income. If you are receiving trust distributions the proposal is to have a minimum tax rate of 30% to beneficiaries. However, testamentary trusts (a trust that starts once you pass away and only if it is stated in your Will), special disability trusts and farm trusts will be exempt.

Non-Concessional Contribution (NCC) Cap
NCC are funds added to superannuation that have already had tax paid (in comparison to concessional contributions which are made before income tax is paid). The NCC cap is currently $100,000pa, or $300,000 using the bring forward provision.  Labor is proposing to reduce this to $75,000pa.

Catch-up Concession Contributions (CC)
Legislation recently passed by the Coalition government allows people to accrue unused concessional contributions (which are capped at $25,000pa) and carry these forward for up to five years. Labor is proposing to remove catch up contributions, meaning you would be limited to $25,000pa regardless of what you did in previous years.

Division 293 Tax
Division 293 tax is an additional tax paid by high income earners when making contributions to superannuation. It currently applies to incomes greater than $250,000 Labor proposes reducing this threshold to $200,000.

Limited Recourse Borrowing Arrangements (LRBAs)
LRBA applies to self-managed superannuation funds and allows these funds to take out loans to purchase assets. Labor proposes to ban all LRBA arrangements.

There is a lot of detail yet to be announced and we will be keeping a close eye on developments.

Please get in touch with us if you would like further information on any of these proposals. More information can be found at:

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