Affiliate Ads support this blog:

Sunday, 2 May 2010

Australian Tax Reform more of a Whimper than a Bang

On the good side, it appears that a lot of the major tax changes that would detrimental to my situation (and should be attractive to a socialist government) ended up not happening (yet - there's always the budget after the next election). Apparently no changes to how capital gains are taxed, negative gearing remains unchanged, and a tax cut for superannuation contributions by low-income workers rather than a flat "concession" for superannuation contributions.

On the bad side, it appears that this "tax reform" isn't as major/significant/revolutionary as Mr Rudd had been intimating for the past couple of years -- there seems to be a definite gap between what Labor promises and what it actually delivers. And from the brief highlights I've read about so far it appears that many of the changes are being "phased in" over such a long time scale that the effects will be minimal for many workers. An example is the headline grabbing "boost" to superannuation SGL rate from 9% of salary to 12% of salary. Even though older workers (who started work well before universal superannuation was implemented) would benefit the most from this change, by not introducing it until 2019 many of these workers will have retired before it comes into effect. Then again, raising the SGL age limit to 75 fits a vision where workers are expected to work well beyond 65 if they are fit and healthy and don't have enough super saved up to retire at 65.

On the plus side, the increase in the contribution cap to $50,000pa for workers aged over 50 with less than $500,000 in super means I will be able to salary sacrifice more into super (though not quite as much as before the last round of superannuation changes were introduced by Labor). The $500 government superannuation contribution for low-income workers (up to $37,000 income apparently) may also be of benefit to DW (working part-time) and DS1 (who earns a few thousand each year from busking and makes superannuation contributions). I won't know for sure until the May budget comes out a week from Tuesday and I can read the fine print.

Probably the worst aspect of this "tax reform" program is that the changes will be introduced over the next decade, and due to political reality (several election campaigns, shifts in the balance of power, and possibly a couple of changes of government) nothing that is currently "planned" will necessarily become reality. In terms of being able to make long term financial plans that are "tax effective", the devil you know is infinitely preferable to the devil you don't know.

Subscribe to Enough Wealth. Copyright 2006-2008

No comments: