The Australian tax landscape: Upcoming election & tax year-end planning

1. What is the issue?

Following on from our earlier tax snapshot (The Dynamic Australian tax landscape), Australia now truly finds itself in the middle of a “perfect storm” due to the imminent Federal election on 18 May 2019 and the impending income tax year end of 30 June 2019.

We know Parliament is currently dissolved and will only be re-constituted after the election. This begs the question whether there will be enough time before 30 June 2019 for;

  • A new Parliament to introduce and pass new legislation (especially those proposals having an impact on the current 2019 income tax year such as the increase to the low-and-middle income tax offset and those proposals with a 1 July 2019 start date); and
  • Taxpayers to familiarise themselves with such new proposed legislation and organise their affairs in such a way to be prepared for new legislative changes currently proposed to apply from 1 July 2019.

As an example, the Labor party proposes to abolish cash refunds of excess imputation credits for individuals and trusts and to tax discretionary trust distributions at 30% from 1 July 2019. These tax proposals are quite contentious, and there is a lot of speculation (based on very limited information) about how these proposals are supposed to operate if they were to ever become law.

With all this uncertainty, the following questions spring to mind:

  • If the Labor party were to become the next Australian Government, would there be enough time for draft legislation to pass through Parliament before 30 June 2019 to allow taxpayers (and their tax advisers) sufficient time to digest the precise details of these proposals to familiarise themselves with the new measures and organise their affairs in such a way to be best prepared for the impending changes?
  • What if there is a hung Parliament and what influence will the crossbenchers have on passing legislation?
  • Do taxpayers understand the risks involved if they take action in anticipation of a proposed law change that does not eventuate?

For example, with the benefit of hindsight, Australian expats who sold their dwellings before 11 April 2019 (i.e. the date the election was called and thereby causing unenacted Bills to lapse), would probably not have sold their dwellings had they known the Bill before Parliament proposing to abolish the main residence exemption for non-residents selling their dwellings on or after 1 July 2019, would not become law (Non-residents will no longer lose access to the main residence exemption).

2. What are the certainties for 30 June 2019 tax planning?

Regardless of these uncertainties, we also have a number of certainties (i.e. enacted law) that will be relevant for taxpayers and their 2019 year-end tax planning.

We have set out below a brief snapshot of some of the main issues including:

a) New tax issues relevant for the 2019 income tax year.

b) Tax proposals that are no longer going ahead (i.e. no longer relevant for 2019 income tax year) or have been postponed.

c) New tax laws applying from 1 July 2019.

Some of the main new tax issues (i.e. legislated issues) relevant for 2019 are set out in the table below:

2019 Income Tax Year.png

(1) (2) (3)

Examples of proposals that are no longer going ahead:

  1. The proposal to abolish access to the main residence exemption for foreign individuals (i.e. non-tax residents of Australia) who sell their dwelling on or after 1 July 2019.
  2. The proposal to provide a one-off 12-month superannuation guarantee amnesty period from 24 May 2018 to 23 May 2019 in respect of superannuation guarantee payments that were not made in the period from 1 July 1992 to 31 March 2018.

Furthermore, the proposal to make fundamental changes to Division 7A has been postponed to 1 July 2020.

New law has also been enacted whereby from 1 July 2019:

  • Employers would only be able to claim deductions for payments to workers if they had met their PAYG withholding obligations for that payment (i.e. have withheld amounts from the payment before paying the worker and reported the withheld amount to the ATO).
  • Road freight, IT and security providers would also be subject to the taxable payment reporting regime (i.e. data matching of information in certain industries of payments made to contractors).

3. How can Findex help you?

In an ideal world, tax legislation should operate prospectively (i.e. only apply from a future date) to afford taxpayers enough time to familiarise themselves with the new measures and organise their affairs in such a way to be best prepared for the impending changes. Unfortunately, this is not always the case.

We trust you found this tax snapshot useful to alert you to some of the most relevant changes that may affect your 2019 tax year-end planning.

If anything in this tax snapshot triggered your interest or you are the type of taxpayer likely to be affected by these changes, please contact your Findex adviser.

We have developed a 2019 tax year-end planning toolkit to discuss various tax issues with you in more detail to help you identify risks (which we can help you to manage) and opportunities (which we can help you to utilise) that may be relevant to your situation.

We have considerable experience advising on income tax concessions that may be available for your business and look forward to discussing other ways we can help your business.

Through our Tax Advisory team across Australia, we can help you identify potential opportunities that may be available for your business while at the same time help you to manage your exposure to business risks.

Our Family Office Model means regardless of the location or service offering of your key relationship manager, we can access the right Tax Advisory expertise for you.