On the 23rd of May 2022, the ALP officially won the election with Anthony Albanese sworn as Australia's 31st Prime Minister. Continue reading below to see which tax policies we can expect from a Labor Government.
"Labor will deliver a progressive and sustainable tax system. This will provide incentives for all Australians to work and undertake productive enterprise, while guaranteeing adequate revenue to fund quality public services, bring about a more equal distribution of income and wealth, and achieve the nation's social, economic and environmental objectives."
- Quote from the ALP National Platform, adopted at the 2021 Special Platform Conference. Prudent fiscal and monetary policy (Section 13, pg. 13)
Individuals
Individuals who earn over $45,000 will receive support from the ALP for tax cuts
Further support to increasing the 21/22 Low and Middle Income Tax Offset by $420
OECD Two-Pillar Solution
"The Two-Pillar Solution will ensure that multinational enterprises (MNEs) will be subject to a minimum tax rate of 15%, and will re-allocate profit of the largest and most profitable MNEs to countries worldwide."
- Quote extract from "Brochure: Two-Pillar Solution" (Introduction, pg. 3)
The ALP support the adoption of the OECD Two-Pillar model, which will see multinational enterprises (MNE's) such as Amazon, Google and Facebook conform to a minimum 15% tax rate from 2023. Further to this, the ALP will cap debt-related deductions to 30% of MNE's profits, this is discussed further in the next section.
The ALP's support and adoption of the Two-Pillar model will allow further funds to be available to vital services including Medicare, aged care and child care; discouraging multinationals to continue using tax havens and tax avoidance schemes to avoid paying tax in Australia.
OECD Debt Deductions
Currently, the Australian rules for interest deductions on debt funding for thinly capitalised multinational entities is measured by either a debt-to-assets safe harbour rule (60%), worldwide gearing (WWG) or arm's length debt (ALD) amounts. To ensure multinational Australian entities are not responsible for eroding the Australian tax base by claiming exorbitant interest deductions on debt funding, the ALP is supporting the adoption of the OECD debt deduction approach. From the 1st of July 2023, the ALP is proposing to exchange the safe harbour rule (60%) and replace it with a 30% measurement of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). The ALP support maintaining the current WWG and ALD tests. This is projected to raise $1.45 billion and will impact approximately 600 firms within Australia.
Petroleum Resource Rent Tax (PRRT)
"We're not proposing to change the PRRT. Some of those tax arrangements are legitimate, when it comes to writing off big investments that they've made in Australia and they've done that under existing tax law."
- Jim Chalmers MP, Shadow Treasurer - ABC Radio Interview on 28 April 2022
Superannuation
The ALP are committed to the current legislated Superannuation Guarantee pathway of 12% of wages by 2025
After 12% has been achieved, the ALP have advised their support in developing another pathway to raise the rate to 15%
In early February 2022, the removal of the $450 monthly income threshold was passed in Parliament, taking effect from the 1st of July 2022. For every $1 earned, employers will be required to pay 10% SG regardless of whether their income reaches $450.
The ALP have also confirmed their support to close the gender pay gap in superannuation savings
References
ALP National Platform, Prudent fiscal and monetary policy (Section 13, pg. 13) https://alp.org.au/media/2594/2021-alp-national-platform-final-endorsed-platform.pdf
OECD Brochure: Two-Pillar Solution
https://www.oecd.org/tax/beps/brochure-two-pillar-solution-to-address-the-tax-challenges-arising-from-the-digitalisation-of-the-economy-october-2021.pdf
Labor in Support of Two-Pillar Solution https://www.theguardian.com/australia-news/2022/apr/27/labor-to-support-global-push-for-minimum-15-tax-rate-on-multinational-corporations Understanding the post-election tax policies
https://www2.deloitte.com/content/dam/Deloitte/au/Documents/tax/deloitte-au-tax-understanding-post-election-tax-policies-9-may-2022-110522.pdf ABC Radio Interview Transcript with Jim Chalmers MP, Shadow Treasurer https://jimchalmers.org/latest-news/transcripts/abc-brisbane-drive-28-04-22/
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