Tax issues for the 2022 Federal Election

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Tax perspectives in the lead up to the 2022 Federal Election

The political landscape after the 2021 Federal Budget

Following the release of the 2021 Federal Budget, you can gain some insight into the tax policies of the Liberal National Coalition and the Australian Labor Party (ALP). An analysis of the different political perspectives on tax policy is discussed below.

How is the Coalition positioning on tax issues?

The Coalition's tax plans appear to be to maintain the current legislated tax rates and otherwise only 'tinker at the edges'. Tax reform does not appear to be on the Coalition's agenda, nor is there an indication of austerity measures. The Commonwealth Treasury have forecast decreasing deficits over many years and accordingly a budget surplus is not on the immediate horizon with the Coalition's tax policies.

This indicates that the 2022 Federal Election tax policies for all political parties will be starting from a very different economic perspective when compared to the 2016 and 2019 Federal Elections. For example, net debt is forecast by Treasury to peak at $980 billion in 2025 and the Tax-to-GDP ratio is predicted to increase to 24.4% which is around the average since 2000 (see Australian Government Revenue web page)

There are some general observations however from the 2021 Federal Budget which can be made about the Coalition's overall tax policies.

The 2021 Federal budget sought to ensure families, small business and retirees would receive a benefit through lower taxes. See our summary of the Federal Budget tax measures. The construction of new housing remains a focus for helping grow the economy with support for first home buyers. A new 17% tax rate for medical and biotechnology innovations may attract industry attention from overseas and bolster the Australian biotech sector.

The Coalition are not likely to recommence the full JobKeeper program. Rather the Coalition have elected for targeted funding for specific industries and the use of disaster relief payments. This is likely to be subject to ongoing change because there can be significant variations in the Covid-19 pandemic infection rates. The vaccine rollout is also a significant factor.

Anthony Albanese's (ALP) tax proposals

Anthony Albanese's announcements and budget reply provided some clues for what to expect at the next Federal Election. Its clear that the ALP have decided to not implement the "retirees' tax" (ie. no changes to the franking credit rules as announced 1 January 2021) and the already legislated 'Stage 3' tax cuts may be partially amended (although Anthony Albanese hinted at a total repeal of the Stage 3 tax cuts from media comments in October 2020).

It is unclear what specific tax policies may be announced in relation to the response to the Covid-19 pandemic. As at 31 May 2021, Anthony Albanese's policies for the ALP on his website did not refer to any tax policy since 1 January 2021. The Budget Reply Speech also did not refer to the ALP's tax policies.

The ALP's New Energy apprenticeships program would provide up to $10,000 for 10,000 apprentices ($100 million) as an incentive to businesses in the renewable energy sector.

As reported in media comments on 30 March 2021, Anthony Albanese has not ruled out changes to negative gearing rules or Capital Gains Tax (CGT). Changes to negative gearing and CGT laws formed a part of the ALP tax policies at the 2016 and 2019 Federal elections.

The ALP plan to spend $10 billion on 20,000 new publicly owned homes is the clearest signal yet that the ALP's preferred position is to limit private ownership of rental properties in favour of public housing. This does offer a hint that there will be policies to, for example, withdraw deductibility of interest for investment properties, or change the CGT tax rates. No economic modelling was released by the ALP on the $10 billion housing proposal and there was no indication whether the ALP intended to use Federal or State owned land for the proposal.

The ALP have not explained whether their future election commitments will be funded through a higher deficit, cutting other government expenditure, or raising additional taxes.

The ALP have left themselves with ample room to change their position on tax by explaining that they will not take the same tax policies to the next Federal Election. That may mean that the 2016 and 2019 tax policies could be modified and be put forward as tax policy at the next Federal Election.

The Victorian ALP State Government's increases to State taxes has sent a clear signal that the ALP are desirous of increasing taxes to fund their election commitments in Victoria. This could affect the ALP's overall tax policies for the Federal Election.

Based on the ALP tax policies at the 2016 and 2019 Federal Elections and media statements by ALP shadow ministers, there are key areas of tax policy which could form a part of the ALP's tax agenda for the 2022 Federal Election including;

  1. increasing tax rates on capital gains including for property and shares;
  2. removal of deductibility of interest for investment properties;
  3. taxation of trust income;
  4. banning of superannuation limited recourse borrowing arrangements;
  5. increasing tax rates for high income earners (potentially by deferring the Stage 3 tax cuts); and
  6. removal of tax offsets for low to middle income earners.

Last updated: 4 June 2021.

Disclaimer: The information in this document reflects our understanding of the proposals as at the date of publication from information provided by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on your specific circumstances.

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