Life Under Labor
During last year’s election campaign, Labor strived to reassure the electorate that, in government, it would maintain the same general approach to economic policy that we have experienced over the last 11 years. It was a key part in the new government’s electoral success. Labor also mirrored the previous government in its promises regarding tax cuts and new spending.
Tax
As far as tax cuts are concerned, Labor proposes a progressive increase in thresholds. After some minor changes in 2010, their plan is to massively expand the 30% tax bracket and reduce the top marginal rate from 45% to 40% by 2013:
| Current Tax Rates | Aspiration for 2013/2014 | ||
| Income ($) | Tax Rate (%) | Income ($) | Tax Rate (%) |
| 0 – 6,000 | 0 | 0 – 6,000 | 0 |
| 6,001 – 30,000 | 15 | 6,001 – 37,000 | 15 |
| 30,001 – 75,000 | 30 | 37,001 – 180,000 | 30 |
| 75,000 – 150,000 | 40 | 180,001+ | 40 |
| 150,001+ | 45 | ||
Superannuation
On the superannuation front, Labor believes the level of compulsory superannuation guarantee of 9% is too low, and that a more appropriate target is 15%. This is close to the view of the superannuation industry, which has long argued that contributions of 18% of income are required to provide for a comfortable retirement. However, like the long term tax cuts, this higher superannuation guarantee should also be viewed as aspirational, as it will be resisted strongly by employers.
Labor supported the Coalition’s recent overhaul of superannuation, and hasn’t flagged any major changes to current rules.
First Home Buyers
Labor proposes the introduction of a concessionally taxed savings vehicle to assist first home buyers. First Home Savings Accounts would operate separately from existing superannuation, but would be taxed in a similar way. Contributions of up to $5,000 pa could be made from pre-tax income, while withdrawals could be made after a minimum of four years and generally only to purchase a new home. Qualification to use these accounts would match the rules that apply to the existing First Home Owners Grant.
Tax-Effective Managed Investment Schemes
Labor will review tax-effective managed investment schemes, which tend to be popular in the lead up to 30 June each year. The previous government had already announced a number of changes to these arrangements. People considering these investments will need to keep themselves informed of progress in this area.
Pensioners
Labor’s pensions policy focused on improved rates for certain types of ancillary payments. Pensioners can expect an increase in the Seniors’ concession and telephone allowance, and improvements to the utilities allowance.
There is an extensive process these proposals need to pass through before they are confirmed, and there are bound to be various refinements along the way. Labor’s first Federal Budget in May this year will provide an important update.
Sources: Labor's Tax Plan For Australia's Future (October 2007), Federal Labor's Low Tax First Home Saver Accounts (Novermber 2007)