Looming election casts uncertainty over key tax measures: Tax Institute

Tax professionals are dealing with a number of announced by unenacted legislative tax measures and the looming federal election will create even greater uncertainty for clients, The Tax Institute chief executive Scott Treatt has warned.

“With an election year, as soon as that election is called, we go into caretaker mode. Caretaker mode then adds to that list of announced but unenacted measures,” Treatt said.

Some of these include the Division 296 tax for earnings on super balances above $3 million and the instant asset write-off for the 2024–25 financial year, which is already half over, he said.

“So, calling an election will potentially throw more doubt and uncertainty around some of the key issues within our system.”

“We’ve already seen certain things from a Senate perspective get kicked down the road to be able to pass certain bills and clear the decks.”

Given the contention around the Division 996 tax, particularly the concept of taxing unrealised gains as part of the new tax, Treatt said there is significant uncertainty surrounding this measure.

“It’s been reported that it won’t be debated before the election but where does it sit? What if there’s a change in power.”

The instant asset write-off measure is another area where there’s likely to be uncertainty.

“We got this announcement in the budget that the 2025 financial year would have a $20,000 cap applied to the instant asset write-off,” Treatt said.

“It then went back and forth following the proposal to increase it to $30,000 and the proposal to make it permanent, which we support.”

Treatt noted that the 2024–25 financial year is now half over, with the Senate not due to sit until next month at the earliest.

“At best the law will go through then, leaving only four months left of the year to make decisions.”

However, if the election is called early, Treatt warned there could be a scenario where it could be past the end of the 2024–25 financial year before the measure is passed by Parliament.

“We would have retrospective legislation for FY 2025 on which people have allegedly made decisions and allegedly given advice in relation to and it just highlights how the process around law development, policy development and law implementation is failing,” Treatt said.

“It's crumbling in terms of politics getting in the way of good policy.”

Uncertainty around policy, Treatt added, also creates challenges for tax professionals when advising their clients on what to do.

“Clients want to understand and at times they can get frustrated with advisors, rather unfairly, because they’re asking what to do and the [practitioner] is saying I can’t necessarily tell you to do something because the government has kicked the can down the road.”