The
Australian Labor Party has put forward a number of policies which limit the
degree to which affluent groups in our society can manipulate the tax system.
These tax reform policies will:
* limit negative gearing to investment properties
already negatively geared and newly built residential housing. However net income
losses on existing negatively geared properties will not be able to be used to
offset salary & wage income;
* cease cash
refunds for excess dividend imputation credits on which the investor personally paid
no tax originally and who has no current tax liability to offset with these
credits;
* reduce the discount on capital
gains tax from 50 per cent to 25 per cent after the deduction for any capital losses. Some assets
and events are exempt from capital gains tax. These include selling your
principle home, personal car, personal use assets or selling an asset acquired before capital
gains tax was introduced on 20 September 1985.
According to the Australian Taxation Office if you are an individual rather than a corporation then the Capital Gains Tax Rate is the same as your Income Tax Rate in the applicable year.
These same policies have caused former Deutsche Bank director, current Australian Treasurer and Liberal MP for Kooyong Josh Frydenberg (left) to morph into a frenzied
Trump. Pumping out slogans, misrepresentations and sometimes downright political lies on
every media platform he can access.
Josh Frydenberg has
launched a pre-election assault on Labor’s plan to halve the capital gains tax
discount, warning that hundreds of thousands of Australians will be taxed at
the “highest rates” in the Western world.
Shifting his focus from
Bill Shorten’s proposal to limit negative gearing to new dwellings and the
“retiree tax”, the Treasurer yesterday cited government analysis that showed
Australians would be taxed up to 36.75 per cent on their capital gains under Labor’s
policy, up from 23.5 per cent now….1
So why is
Frydenberg screaming misrepresentations at the top of his lungs, urged on by the Housing Industry Association?2
Could it be
because 56.2 per cent of the tax benefits from Negative Gearing go to individuals whose incomes are in the top 20
per cent of Australian incomes and only 5.2 per cent of the tax benefits go to individuals
in the lowest 20 per cent of incomes?
Or because est.
75 per cent of tax savings from Capital
GainsTax discounts go to the top 10 per cent of high income families?
Perhaps it’s
because Self-Managed Super Funds are a major beneficiary of cash refunds for excess dividend imputation
credits, with 50 per cent of the benefit to SMSFs accruing to the top 10 per
cent of SMSF balances and some funds receiving cash refunds of more than $2.5
million a year?
Likely he’s
screaming because all three instances represent how successfully the affluent have gamed
the tax system to date and he like most right-wing politicians see such tax
manipulation as a right belonging to them and their mates and, therefore have no
interest in supporting a fairer distribution of the tax burden.
He also
appears to be ignoring the fact that Treasury modelling of these Labor policies shows an increase in federal government revenue by $2 billion over time and, that these same policies have the potential to put downward pressure on property prices in the
short-term so that genuine first home buyers might get a foot in the door with
more affordable residential housing.
Bottom line
is that Labor’s tax reform policies are primarily targeted at investors with a marginal tax rate (including Medicare Levy) of over 45 per
cent - which roughly equates with the top 20 per cent of Australian residents
with private wealth.
Footnotes
1. KPMG, Demark- Taxation
of investment income and capital gains: “Interest and
rental income are taxable as investment (or capital) income with a marginal tax
of 42 percent (2018).” Denmark's Capital Gains Tax Rate is higher than the worse case scenario of up to 36.75 per cent under Labor which Frydenberg postulates in Para 5 of this post. Therefore Labor would not be imposing "the highest" rates in the Western world'.
March 2018.
* Photograph of Josh Frydenberg from msn.com
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