Election results are in, what’s next for tax?
Clarke McEwan Accountants
The Australian Labor Party (ALP) has won the 2022 Australian federal election and has been elected to form government in the House of Representatives. It is unclear at the time of writing whether the ALP will have a majority in the lower house.
In the Senate, the ALP will not have a straight majority and will likely have to work with the Crossbench in order to pass legislation.This article discusses tax changes that we may expect to see in the near future. It also considers the future of key tax changes previously proposed by the Coalition.
Election promises
In the leadup to the election, Labor had proposed the following tax measures if elected:
- providing an FBT exemption for electric cars provided by an employer below the luxury car threshold from 1 July 2022
- limiting debt deductions by multinationals to 30% of profits from 1 July 2023
- limiting the ability of large multinationals to abuse Australia’s tax treaties while holding intellectual property in tax havens from 1 July 2023
- implementing the OECD’s Two-Pillar solution for a global 15% minimum tax
- reforming the Pacific Australia Labour Mobility Schemes, including changes that would see the government meeting upfront travel costs over $300 from January 2023.
These measures will not be effective until enacted by the incoming government.
Bills lapsed when the election was called
Measures contained in Bills that lapsed upon the proroguing of parliament will now be subject to consideration of the incoming government.
Key tax changes proposed in lapsed Bills related to:
- Work-related self-education expenses: removing the $250 non-deductible threshold from the 2022–23 income year.
- Electronic platform operators: requiring operators to provide transactions information to the ATO. In a Senate Committee report on the Bill, Labor had supported the amendments but highlighted that the proposed changes burdened workers rather than multinational technology companies.
- Effective life of intangible assets: allowing taxpayers the choice to self-assess the effective life of certain intangible assets that start to be held on or after 1 July 2023. When introduced in 2022, Labor stated it would not oppose the measure. However, Labor had previously opposed similar amendments proposed by the Coalition government in 2017 from the Treasury Laws Amendment (2017 Enterprise Incentives No 1) Bill 2017. The amendments in that Bill were ultimately removed.
- Recovery grants for Cyclone Seroja: making eligible grants non-assessable and non-exempt income.
- Labour mobility schemes: changes to effective tax rate on certain income earned by workers participating in the Australian Agriculture Worker Program or the Pacific Australia Labour Mobility scheme.
- Patent box regime: providing concessional tax treatment for eligible income from exploiting a medical or biotechnology patent, to apply to patents issued after 11 May 2021 in respect of income years starting on or after 1 July 2022.
Tax changes proposed in the Federal Budget
Labor has previously indicated that it would seek to issue its own budget by the time of the usual mid-year fiscal and economy update in December. These measures were not introduced into parliament, and it is unknown at this stage whether the Labor government will proceed or make significant modifications. Key tax measures in the Coalition government’s 2022–23 Budget included:
- temporary increased 20% deduction for small business external training expenditure from 7:30pm 29 March 2022 (Budget night) until 30 June 2024
- temporary increased 20% deduction for small business expenditure supporting digital adoption from 7:30pm 29 March 2022 (Budget night) until 30 June 2023
- concessional tax treatment for primary producers selling Australian Carbon Credit Units from 1 July 2022
- expansion of patent box concession to include agricultural and low emissions innovation from 1 July 2023.
Other pending measures
The jury is still out on the future of tax changes announced by the previous government, particularly the following measures with a rapidly approaching start date:
- Digital games tax offset: 30% refundable tax offset for qualifying Australian development expenditure on eligible games, due to commence from 1 July 2022.
- Car parking fringe benefits: modifications to the definition of “commercial parking station” to better reflect the policy intention for car parking fringe benefits, for benefits provided from 1 April 2022.
- Downsizer superannuation contributions: expanding eligibility to make downsizer contributions to individuals aged over 55 from 1 July 2022. As currently legislated, the eligibility age will reduce from 65 to 60 years of age from 1 July 2022.
Other longstanding tax proposals that we may see the incoming government address include:
- Reforms to tax residency. The previous government had announced changes relevant to individuals, SMSFs and foreign incorporated companies.
- Debt and equity rules. Amendments to clarify the scope of an integrity provision was first announced in a 2011–12 Labor Budget announcement. Draft legislation based on the Board of Taxation’s recommendations from their review of the debt-equity provisions were released for consultation in 2016 by the previous government.
- Division 7A. Targeted amendments to improve the operation and administration of Div 7A were first announced in the 2016–17 Budget. Further proposed changes for unpaid present entitlements to come within the scope of Div 7A were announced in the 2018–19 Budget.
- Not-for-profits. The Labor government had previously introduced amendments to standardise the term “not-for-profit” by replacing defined and undefined uses of “non-profit” throughout tax legislation in a lapsed 2012 Bill. The previous government had also proposed changes to the administration of deductible gift recipients and the introduction of a deductible gift recipient category for pastoral care in schools.
Over the next few months, we will follow the progress on these measures once they have been considered by the incoming government.
However, if you wish to speak with us specifically about one or more of the items listed above, please do not hesitate to contact us so that we can keep you fully informed as soon as we become aware of any new information.
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20% reduction in student debt The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans: · HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP) · VET Student loans · Australian Apprenticeship Support Loans · Student Start-up Loans · Student Financial Supplement Scheme. The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance and the Government has indicated that you will be notified once the reduction has been applied. If you had a HELP debt showing on your ATO account on 1 April 2025 but you paid the debt off after 1 June 2025 then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you. The HELP debt estimator is a useful tool to get an idea of the reduction amount, please reach out if you need any help in working out eligibility. Changes to repayments The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments. The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year. Under the new repayment system an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above $67,000. The repayments will be calculated only against the portion of income that is above $67,000. Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO. For many people the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.
The Productivity Commission (PC) has been tasked by the Australian Government to conduct an inquiry into creating a more dynamic and resilient economy. The PC was asked to identify priority reforms and develop actionable recommendations. The PC has now released its interim report which presents some draft recommendations that are focused on two key areas: · Corporate tax reform to spur business investment · Where efficiencies could be made in the regulatory space (ie, cutting down on red tape) The interim report makes some interesting observations and key features of the draft recommendations are summarised below. Corporate tax reform The PC notes that business investment has fallen notably over the past decade and that the corporate tax system has a significant part to play in addressing this. The PC is basically suggesting that the existing corporate tax system needs to be updated to move towards a more efficient mix of taxes. The first stage of this process would involve two linked components: · Lower tax rate: businesses earning under $1 billion could have their tax rate reduced to 20%, with larger businesses still subject to a 30% rate. · New cashflow tax: a net cashflow tax of 5% should be applied to company profits. Under this system, companies would be able to fully deduct capital expenditure in the year it is incurred, encouraging investment and helping to produce a more dynamic and resilient economy. However, the new tax is expected to create an increased tax burden for companies earning over $1 billion. Cutting down on red tape The interim report notes that businesses have reported spending more time on regulatory compliance – this probably doesn’t come as a surprise to most business owners who have been forced to deal with multiple layers of government regulation. Some real world examples include windfarm approvals taking up to nine years in NSW while starting a café in Brisbane could involve up to 31 separate regulatory steps. The proposed fixes include: · The Australian Government adopting a whole-of-government statement committing to new principles and processes to drive regulation that supports economic dynamism. · Regulation should be scrutinised to ensure that its impact on growth and dynamism is more fully considered. · Public servants should be subject to enhanced expectations, making them accountable for delivering growth, competition and innovation. These are simply draft recommendations contained in an interim report so we are a long way from any of these recommendations being implemented. However, the interim report provides some insight into areas where the Government might look to make some changes to boost productivity in Australia. The PC is inviting feedback up until 15 September on the interim report before finalising its recommendations later this year.
Back in March this year the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on higher incomes. The Government has indicated that the reforms in this area will take effect from 2027. This didn’t come as a complete surprise as the Competition Review had already published an issues paper on the topic and the PC had also issued a report indicating that limiting the use of unreasonable restraint of trade clauses would have a material impact on wages for workers. Treasury has since issued a consultation paper, seeking feedback in the following key areas: · How the proposed ban on non-compete clauses should be implemented; · Whether additional reforms are required to the use of post-employment restraints, including for high-income employees; · Whether changes are needed to clarify how restrictions on concurrent employment should apply to part-time or casual employees; and · Details necessary to implement the proposed ban on no-poach and wage-fixing agreements in the Competition and Consumer Act. Treasury makes it clear that the Government is not planning to change the way the rules apply to restraints of trade outside employment arrangements (eg, on sale of a business) or change the use of confidentiality clauses in employment. If the proposed reforms end up being implemented, then this could have a direct impact on a range of employers and their workers. Existing agreements will need to be reviewed and potentially updated. However, it is too early at the moment to guess how this will end up, we will keep you up to date as further information becomes available.
On 1 July 2025 the superannuation guarantee rate increased to 12% which is the final stage of a series of previously legislated increases. Employers currently need to make superannuation guarantee (SG) contributions for their employees by 28 days after the end of each quarter (28 October, 28 January, 28 April and 28 July). There is an extra day’s allowance when these dates fall on a public holiday. To comply with these rules the contribution must be in the employee’s superannuation fund on or before this date, unless the employer is using the ATO small business superannuation clearing house (SBSCH). The ATO has been applying considerable compliance resources in this space in recent years which can have an impact on both employees and employers. Employers To be eligible to claim a tax deduction on SG contributions the quarterly amount must be in the employee’s super account on or before the above quarterly due dates. The only exception to this is where the employer is using the ATO SBSCH. In that case a contribution is considered made provided it has been received by the SBSCH on or before the due date. Employers using commercial clearing houses should be mindful of turnaround times. Commercial clearing houses collect and distribute employee contributions and may be linked to accounting / payroll software or provided by some superannuation platforms. Anecdotally it seems that turnaround times for some clearing houses could be up to 14 days, so it is recommended that employers allow sufficient time before the quarterly deadlines when processing their employee SG contributions. If these deadlines are missed (yes even by a day!) that will trigger a superannuation guarantee charge (SGC) requirement which will result in a loss of the tax deduction and other penalties. The SGC requirements are outlined in the ATO link below: The super guarantee charge | Australian Taxation Office Employers do have the option to make SG payments more frequently than quarterly and this is something that employers will need to become used to if the proposed ‘payday’ superannuation reforms become law. This change is proposed to commence from 1 July 2026 and would require SG to be paid at the same frequency as salary or wages. There is some discussion on the payday super proposal at this link (noting that this is not yet law). The SBSCH will close at this time so employers using this service should start to consider transitioning to a commercial clearing house, please let us know you would like assistance with this. Employees It is recommended that you regularly check your superannuation fund statements and reconcile employer contributions to the amounts listed on your pay slips. Where SG contributions are not received on time (or at all!) employees are encouraged to discuss this first with their employer. Should this not result in a satisfactory conclusion, employees can consider bringing this to the attention of the ATO. There is some helpful discussion on this process at the following link .
