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What Tax Policies Might Be Part Of Labor’s Upcoming Term In Government?

If you have been operating as a business for less than 9 years, you‘ve likely only ever operated under a Liberal federal government. A new government may be causing you some anxiety, especially regarding what a Labor government could mean for your business.

What Can You Expect With A Change In Government?

It doesn’t matter if you have been in business for 9 years, 19 years or even more; the number of times that a government changes leadership (and party) throughout your time operating a business, will not usually have a noticeable change on your business or lifestyle.

During the last several decades, governments have introduced the GST, the Fair Work Commission, higher rates of superannuation guarantee and a reduction in tax rates (which may have only kept up with inflation rates anyway).

There will of course be some people who will benefit from the current change in government (e.g., the Biloela family’s approved permanent visa status). If you are involved in the political landscape and have been elected to or lost your seat, you will certainly be impacted.

For the majority, however, it’s business as usual.

There are, of course, changes that could be good or bad for you depending on your situation. But like always, you need to understand these changes, their rules and how you can work with them.

Tax Policies Of Labour

Labor will proceed with the legislated income tax cuts due to commence on the 1st July 2024.

The previous government announced an increase in the low and middle income offset by $420 to $1,500 this year and Labor are continuing with that policy.

However, the party is not committed to extending either the LMITO or the Fuel Excise Cut past September 2022 at this stage.

Most of their other announcements will have little impact on small business owners.  They have announced a policy to limit tax deductions for large multinationals who hold intellectual property in tax havens that have specific tax treaties with Australia.

Labor has agreed to support the multinational OECD two pillars policy of a minimum tax rate of 15% and allocating the profits of the largest multinationals to market countries.

We may also see changes to the amount of interest a foreign company can charge their Australian subsidiary.  This interest has a small amount of tax withheld that is less than the company’s tax rate and so will be better for a company in Australia to pay its foreign owner interest rather than dividends.

Labor is also promising to introduce tax breaks for electric cars which would save people about $2,000 on a $50,000 vehicle.

The policy would cost $200 million over three years and would work by exempting some electric vehicles (EVs) below the luxury-car tax threshold of $79,659 from import tariffs and fringe benefits tax.

If businesses provided the same car to an employee through a work scheme the company could save up to $9,000 a year. The discount would begin from July this year and be reviewed in three years’ time to reassess the take-up down the track.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier