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 transaction 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 the 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 7:30 pm 29 March 2022 (Budget night) until 30 June 2024
  • temporary increased 20% deduction for small business expenditure supporting digital adoption from 7:30 pm 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 via email at [email protected] or call us at 1300 844 678, so that we can keep you fully informed as soon as we become aware of any new information.

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