We would like to provide you with an update on the potential changes proposed by the Labor government which may occur in 2019. We have attempted to summarise the current situation and their potential implications.
Franking Credits - beginning on 1st July 2019 the Labor party has proposed changes to the dividend imputation system involving the removal of refundable franking credits.
SMSF or super funds investing directly in Australian shares may not be able to receive franking credit refunds.
This will impact clients in pension phase the most, given excess franking credits are refunded to super funds that pay zero tax.
Recently changes have been made to recipients of Centrelink payment, making them exempt from these changes.
There also suggestions of capping the amount of franking credits an individual can receive, potentially resulting in less material changes.
Negative Gearing - a proposal to reduce negative gearing benefits.
Limiting negative gearing to new housing only has been made to commence in July 2019.
Losses from property or investments can only be used to offset gains from property or other investments but not salary income.
As the Labor party is taking a ‘grandfather’ position, any investments made prior to these changes will continue to receive the benefits of negative gearing.
These proposed changes would hurt existing investors who are looking to sell, as asset prices re-adjust under the scenario of zero negative gearing benefits.
Capital Gains Tax Discount - a proposal for 1st July 2019 has been made to halve the Capital gains tax discount from 50% to 25%.
Owners will need to pay more tax on their investments even if it is held by more than 12 months.
Investments made before this date and investments made by superannuation funds will be exempt to these changes.
Non-Concessional Contribution Cap - there has been a proposal to lower the non-concessional contributions cap from $100,000 to $75,000.
This will limit the amount individuals can save in their super accounts.
It is important to note that these changes will require Labor winning the next election and also pass through both the upper and lower house.
Please feel free to contact our office on 02 9232 3055 if you would like us to discuss this with you further.
Please note this information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial advisor, whether the information is appropriate in light of your particular needs and circumstances.
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