Massive tax changes that could hurt your wallet in 2019
RISING and falling taxes will form part of this year's election campaign mix, but Australians are being urged not to act prematurely on proposed changes.
More than a dozen tax and superannuation changes have already been promised or flagged before the election campaign begins.
Labor's policy to scrap share dividend franking credit cash refunds for many self-funded retirees and super funds has attracted the loudest howls of protest. But its plans to halve capital gains tax discounts and limit negative gearing deductions to new investment properties will also hit investors hard.
While the Coalition has foreshadowed more income tax cuts, a potential future Labor Government armed with billions of extra tax dollars from investors and retirees would be able to more than match it.
NDA Law managing director Andrea Michaels said Labor's major changes would impact a lot of people.
"Whichever side wins the election there will be some major tax reform changes coming up," she said.
Ms Michaels said once new rules came into force, tax advisers would plan around them to help clients.
In the self-managed superannuation space, one of Labor's biggest targets, there is already talk about shutting down SMSFs, switching from Aussie dividend-paying shares to international shares, or bringing adult children into SMSFs to retain the benefits of the tax credits.
"There is more money in SMSFs than in any other superannuation sector, including industry super funds," said David Middleton, a director and adviser at financial planning firm MidSec.
Dixon Advisory managing director Nerida Cole said other Labor changes that could sting included:
• Extra super contributions tax paid by some high income earners.
• Reducing non-taxable super contribution limits.
• Capping the level of tax-deductible accounting fees at $3000.
• Tougher rules for family trusts.
• Suggestions that recent super rule changes allowing flexible tax-deductible super contributions and catch-up contributions might be wound back.
However, Labor had also promised positive changes including more super for people on parental leave and very low income earners, Ms Cole said.
"Even if Labor do get elected, these proposals could get reshaped as part of the drafting process and as part of negotiations with the senate," she said.
"So investors need to think through the potential impacts on their situation, but acting now on a proposal could mean you incur costs for no reason."
A positive mid-year Budget update last month opened the potential for up to $9 billion of extra Coalition tax cuts, although government ministers have been coy about what might come and when it might be announced.
The Federal Government succeeded in getting a six-year plan of $144 billion of personal tax cuts through parliament last June, but its legislated cuts for higher-income earners are unlikely to survive any future Labor Government.
Ms Cole said people were worried about the strength of the economy, their jobs and their mortgages, but would welcome more tax cuts "that could mean more money in our back pockets".
A report by CommSec last month called for "serious discussion" about true tax reform rather than just arguing about tax rates for individuals and businesses.
"The International Monetary Fund has recently indicated that there is need for a better balanced system," it said.
Separate research by SMSF group SuperConcepts found more than 60 per cent of SMSF owners would shift money to overseas shares if Labor's franking credits changes occurred.
SuperConcepts CEO Natasha Fenech said this was a "big concern" for Australian companies if locals stopped investing in them. She said the research found that almost 15 per cent of people were thinking of closing their SMSFs.