When I was interviewed for a job with the Labor party I was asked whether I had ever voted for John Howard. It was a joke question and they did not expect me to answer, but I did.
“Of course”, I said confidently, “he has had a better tax policy for some time.”
This Saturday I will vote based on tax policy. Sounds a bit strange. I think that if you fix the revenue side of the income statement, the expenditure side will fix itself (I hope). If you have a simple, efficient, adequate and equitable tax system, you will have the money to pay for what is important, and you won’t have the money to pay for what is not important so soon enough people will stop borrowing to pay for unimportant things (I hope).
So what do we have for this election. Lets summarise the tax policies of the two real options.
What they both agree on…
- All the Super changes in the recent budget.
Yes, while they won’t admit it, the Labor party have taken all the savings in the recent budget made from the super changes… Every single dollar. They say they “might” vary them but only if they raise the same amount of money. So you could vote on who is more likely to back down and remove the retrospective nature of the $500,000 lifetime cap but I am unsure who that would be.
- Company tax cuts for businesses under $2 million.
- Reducing the R&D tax offset by 1.5%
- Minor changes to the personal tax rates at $80k
- Employing more ATO officers to go after multinationals
What Labor is offering…
- Negative gearing (offsetting the interest losses against slurry and wage income – not other income) gone for all new assets unless they are new residential property.
Yes that means if you borrow, buy shares and the shares pay no dividends in a year you can’t claim the interest as a deduction.
- 50% discount become a 25% discount
What I love about the Labor policy to limit negative gearing and the 50% discount is they say it will fix housing affordability and is not just a money grab. So how will reducing the 50% discount on shares and stopping negative gearing on shares fix housing prices? This is just a money grab.
- Keeping the temporary deficit levy so that the highest marginal rate remains at 49%
Lets hope they keep the name so we have a “temporary” deficit levy for many decades to come.
- Capping of tax deductions for managing tax affairs
What the Coalition is offering…
- Company Tax rate changes
But don’t trust any promise more than 3 years away as there will be another election before then. However, the Coalitions company tax rate changes will mean small businesses with less than $10 million turnover benefit, rather than $2 million for Labor.
- Change to SBE definition to $10 million
Not for the Small Business CGT Concessions but this will increase who can get the $20,000 instant asset deduction for one year.
- Div 7A changes
This will be amazing but won’t happen till 1 July 2018 (10 year loans, repayments and interest only due at 3,7 and 10th year, UPEs not loans…)
- GST on all low value imported goods
- Simplified BAS for small businesses (just two labels)
So almost no difference at all other than the discount and negative gearing changes. But I am tempted to vote for the Coalition just on the Division 7A changes, but this is more an administration issue rather than fixing the revenue side of the income statement.
So I might just buy a sausage sandwich before I go in to vote and see where the tomato sauce lands…