IPA spots advice opportunity for tax time 2018
With the next election on the horizon, the Institute of Public Accountants has urged its members to help communicate the implications of the divergent tax changes proposed by both the Coalition and Labor Party.
IPA chief executive Andrew Conway said while it maintained its apolitical stance, IPA members were in the best position to help their clients understand the implications of each tax policies.
“The upcoming tax season will be the last opportunity for our members before the next election to communicate what these policy changes will mean for their clients, so we want them to explain the ramifications of what is proposed for informed decision making,” said Mr Conway.
Similarly, IPA general manager of technical policy, Tony Greco, believes this will be an opportunity for advisers to help explain the different ramifications of certain complex policies.
“We are apolitical but we are saying that a lot of these policies have ramifications and some of the ramifications are not as obvious to their clients as one would think because they can be quite complex like the imputation credit one,” said Mr Greco.
“We're saying to our members, for informed decision making, you've got to explain what these policies translate to when you have that opportunity with clients.
“Negative gearing, CGT discounts, the imputation credits, taxing trusts at a flat 30 per cent — not every client is going to be impacted by these policies but the ramifications are going to be quite diverse because no one tax payer has the same circumstances.”
Despite the policies put forward by the major political parties, Mr Conway is concerned about the reluctance to address holistic tax reform, a call it has issued to the government previously.
“Our key concern is that none of the political parties are talking about holistic tax reform where the total tax mix is taken into consideration,” said Mr Conway.
“Without bold and all-encompassing reform we will still be drowning with a raft of inefficient taxes which stifle growth.”
The IPA has collated a list of policies mentioned by the Coalition and Labor Party to date:
Coalition current tax policies (prior to May Budget) are:
- A reduced corporate tax rate for all companies eventually with a target rate of 25 per cent;
- A likely reduction in personal tax rates particularly for income levels up to $100,000 – the exact details are unknown but should become clearer after the 8 May budget;
- Apart from the already announced increase to the Medicare levy to 2.5 per cent, no further change in current arrangements;
- No change to current arrangements regarding negative gearing of investment property;
- No change to the CGT discount which currently sits at 50 per cent for individuals;
- No change to the current arrangements regarding trust distributions from discretionary trusts;
- No change to the current arrangements regarding imputation in particular, full refund of excess imputation credits; and
- No changes in relation to depreciation - the $20,000 immediate asset write-off available to 30 June 2018 is not currently being extended by the Coalition. That may change in the 8 May budget.
Labor policies mentioned so far:
- A restoration of the company tax rate to the full 30 per cent coupled with a possible lower rate for smaller corporate entities with turnover less than $2 million;
- Higher personal tax rates at the top end and lower personal tax rates at the lower end;
- An increase in the Medicare levy to 2.5 per cent coupled with a more generous Medicare levy arrangement for lower paid workers than currently available;
- A prohibition on negative gearing investment properties other than newly built investment properties;
- A halving of the capital gains tax (CGT) discount to 25 per cent for individuals;
- A minimum tax of 30 per cent on all distributions from discretionary trusts;
- A denial of any refund in respect of excess imputation credits;
- A new deduction (the Australian Investment Guarantee) which will enable a 20 per cent deduction in respect of the purchase of any new eligible asset worth more than $20,000;
- Capping of deductions for managing tax affairs to a maximum of $3,000; and
- Whistleblower rewards for tax evasion.