The Turnbull government has reportedly settled upon just two changes to the tax system following months of speculation.
The government will only target negative gearing and voluntary superannuation contributions, according to an exclusive report by Fairfax Media based on unnamed sources.
It will reportedly attempt to cap tax deductions on investment properties and cap voluntary super contributions, Fairfax claimed.
Both of the policies were judged by Fairfax to be less ambitious than the major tax changes the government had trumpeted. The “minimalist” policies would reportedly raise the funds to give marginal tax relief to middle income earners.
The changes to negative gearing would reportedly not be restricted to new houses like Labor had proposed. Rather, the government would impose “modest” caps on claimable tax deductions for all investment properties.
The government would also reduce the amount of pre-tax income allowed to be moved into superannuation funds, Fairfax reported. As it stands, most taxpayers can contribute up to an extra $30,000 per year to super to reduce tax paid on that income. Those over 50 can contribute $35,000.
This would reportedly be cut to about $20,000, according to Fairfax.
Fairfax Media also reported the Turnbull government was considering tightening the non-concessional cap that allow voluntary after-tax contributions of up to $180,000 per year.
For negative gearing, the government would either “generously” restrict the number of properties that could be negatively geared or wind back the dollar amount that could be deducted from taxable income. One limit under consideration was reportedly $50,000.
Labor reacted with scorn to the plans.
“If this is where the broad ranging tax debate lands us then every claim Malcolm Turnbull made that he would bring broad ranging economic change to the nation is dead,” Shadow Finance Minister Tony Burke told Sky News on Thursday.
The changes would reportedly raise a few billion dollars per year for the budget and allow the government to combat bracket creep by pushing up the income threshold of the $80,000 tax bracket. This would provide tax relief to the top 25 per cent of earners, the report claimed.
Retirement fund earnings would not be directly affected by these changes.