On Thursday April 4th opposition leader Bill Shorten delivered his reply to this week’s Federal Budget. In this article we look at Labor’s reply in relation to tax and superannuation measures, as well as announcements that affect older Australians.
This year it’s more important than ever to analyse ALP’s Budget response, because with a federal election looming some of the coalition’s announcements may never see the light of day. Shadow Treasurer Chris Bowen told the ABC if Labor win the election they will issue a new Federal Budget before next May, “in the third quarter of (this) year”.
Income tax cuts
Labor has promised to enhance the immediate increase in the Low and Middle Income Tax Offset (LMITO) that was announced in the 2019 Federal Budget.
The government announced that the LMITO will increase from this financial year to a new maximum of $1,080 (from the current level of $530) for all taxpayers earning a taxable income between $45,000 and $90,000. Those earning less than $45,000, or between $90,000 and $126,000, will be entitled to a partial LMITO.
However, the ALP has pledged that they will provide a $1,080 LMITO for all taxpayers earning between $48,000 and $126,000. Bill Shorten claimed that “Labor will provide a bigger tax refund than the Liberals for 3.6 million Australians.”
Learn more about how LMITO works.
An income tax cut that Labor won’t support
Labor has refused to support a reduction in the 32.5% tax bracket that the government announced in the 2019 Federal Budget. Treasurer Josh Frydenberg declared that this tax bracket will be reduced from 32.5% to 30% from the 2024/2025 financial year, projecting that 94% of taxpayers will face a marginal tax rate no higher than 30% by then due to this measure.
However, Bill Shorten has claimed that it’s unfair for someone earning $50,000 to pay the same tax rate as someone earning $200,000, so the ALP therefore does not support this Federal Budget announcement.
Bill Shorten reiterated Labor’s previously announced plan to abolish negative gearing for people buying established investment properties if the ALP wins government. However, the policy won’t be retrospective, meaning people who already negatively gear investment properties will continue to be able to do so.
Other Labor tax policies
Shorten made no mention in his Budget reply speech of Labor’s other pre-election tax pledges, which include:
- Abolishing the ability of individuals (except pensioners) and super funds from generating cash refunds from the Australian Taxation Office via using franked credits received on share dividends.
- Lowering the capital gains tax (CGT) discount from 50% to 25%.
- Raising the top marginal tax rate from 45% to 47% (excluding the Medicare levy) for Australians with a taxable income of more than $180,000 per year.
No major statements about superannuation were made in Bill Shorten’s Budget reply speech. However, Labor has already announced a number of superannuation policies ahead of the looming federal election, including:
- Lowering the non-concessional contributions cap to $75,000 (from the current level of $100,000)
- Lowering the Division 293 threshold to $200,000 (from the current threshold of $250,000
- Removing the ability of self-managed super funds (SMSFs) to enter into limited recourse borrowing arrangements
Additional Labor superannuation policies that they are taking to the federal election include:
- Abolishing the current carry-forward concessional contributions scheme.
- Ending the tax-deductibility of personal super contributions made by employees.
- Fast-tracking the increase in the employer superannuation guarantee from 9.5% to 12%
Measures for older Australians
Increased Medicare funding
In his Budget reply, Bill Shorten announced a guarantee that every cancer drug recommended by independent experts would be listed on the Pharmaceutical Benefits Scheme (PBS).
In addition, he announced a $2.3 billion cancer plan that includes:
- Investing up to $600 million in eliminating all out-of-pocket medical costs for diagnostic imaging and providing six million free cancer scans to be funded through Medicare.
- Investing $433 million over four years to fund the bulk-billing of an extra three million consultations with oncologists and surgeons.