Powered by MOMENTUM MEDIA
subscribe to our newsletter sign up

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

The biggest investment, tax themes of the 2019 federal election

Prime Minister Scott Morrison has called the federal election for May 18, and these are the headline issues impacting an investment portfolio. 

Key market considerations

According to chief economist at AMP Capital, Shane Oliver, they headline items for investors to consider include:

Australian federal elections tend to result in a period of uncertainty. Often, this results in weak gains on average for shares, followed by a bounce once the result is decided.

Advertisement
Advertisement

With Labor promising higher taxes, larger government and more intervention in the economy, Mr Oliver said the May election presents a “starker choice” than has been the case since the 1970s. This suggests a period of greater uncertainty for investors than usual.

Labor’s higher tax and regulation agenda may be a negative for Australian assets, Mr Oliver said, but this could be partly offset in the short term by more targeted fiscal stimulus.

To return to wage gains of note requires a “productivity enhancing reform agenda” and a drop in unemployment, Mr Oliver said. He notes the election is likely to deliver wage gains.

Taxing times

Labor

Labor plans to limit negative gearing to new investments from 1 January 2020, with the CGT discount to be halved to 25 per cent for investments entered into after 1 January 2020.

In his budget reply speech last week, opposition leader Bill Shorten reinforced his plans to put an end to cash refunds for excess dividend imputation credits.

While matching the government’s plan to give low- to middle-income earners a tax offset of $1,080, Labor will not back the government’s plan to introduce a mega 30 per cent tax bracket.

Small business clients who use discretionary trusts are also set to feel the pinch by Labor’s plan to introduce a minimum 30 per cent tax rate for discretionary trust distributions to adults.

Labor will also look to introduce the Australian Investment Guarantee, a 20 per cent immediate deduction of any new eligible asset worth more than $20,000, with the remaining 80 per cent depreciated over the effective life from the first year.

You can read more about the Labor Party's plans here. 

Liberal

Federal Treasurer Josh Frydenberg moved for Australian taxpayers earning up to 126,000 per year to receive a tax cut in the 2019/20 federal budget.

Under the Treasurer’s proposal, from this tax time - the 2018/19 financial year - low and middle-income earners will have their tax reduced by up to $1,080 for single earners and up to $2,160 for dual income families.

Further, the Treasurer proposes reducing the 32.5 per cent tax rate to 30 per cent by in 2024-25.

The government estimates around 13.3 million taxpayers will pay permanently lower taxes in 2024-25 as a result of its package of tax changes.

You can read more about the Liberal Party's plans here. 

The biggest investment, tax themes of the 2019 federal election
nestegg logo
subscribe to our newsletter sign up
FROM THE WEB
Recommended by Spike Native Network
Dr Terry Dwyer, Dwye... - She is quite right of course. Returns to both capital and labour incomes are much reduced by taxation and it has increased enormously since the.......
Anonymous - A Bad call by the RBA. Lower interest will not stimulate the economy any more at 1.25% than at 1.5%, which was already too low. The imminent election.......
Shelly H - Im with ING, have a Mortgage Simplier Account and they haven't dropped my interest rate. Where is this information coming from......or is it for new customers only!!....
Anonymous - agree entirely and would add that putting the money into super locks it away and gives the government control over you and your money. The 'blue sky'.......