How can advisers prepare clients for another Labor term?

In an analysis of what the outcome of the federal election will mean for advisers, MLC TechConnect explained that there are several key pieces of proposed legislation that could have a significant impact for their clients moving forward.

One such issue that has been on advisers’ radar for some time now, though even more so now that Labor has successfully secured another term in government, is the additional 15 per cent tax for super balances that exceed $3 million.

While this was introduced to Parliament prior to the election and had been bogged down in the Senate, the legislation lapsed once the election was officially called and Labor will have to reintroduce it.

However, with the possibility that Parliament will not sit before 1 July 2025 – the initial proposed commencement date for the legislation – MLC TechConnect said “advice should not be provided to clients in relation to Division 296 tax until law is formally passed”.

Additionally, Labor has proposed extending the $20,000 instant asset write-off threshold by another 12 months to 30 June 2026. As such, MLC suggested it is worth considering whether small business clients should acquire eligible business assets to take advantage of the upfront deductions while they can.

Also related to tax, the new government has proposed a tax deduction of $1,000 to eligible taxpayers for work-related expenses without the need to provide evidence, commencing 1 July 2026. It is important to note that this will only apply to those receiving “labour income” and does not include income from running a business or investment income.

Labor has also made some significant promises in relation to student loans that may impact when they choose to make payments towards their debt.

For example, they have proposed a 20 per cent cut to student loans, including those with HELP student loans, VET student Loans, Australian Apprenticeship Support Loans, Student Start-up Loans and Student Financial Supplement Scheme.

The proposed commencement date for the legislation is 1 June 2025, though it is important to note that this is also the date that loans are indexed, and while the 20 per cent reduction would be applied to the balance prior to indexation, clients may wish to consider whether it would be more beneficial for them to make a payment before or after 1 June.

More on student loans, the threshold for compulsory payments towards student debt is also expected to be raised from $54,435 to $67,000 for FY2025–26, which MLC suggested could provide further relief for clients and free up income for other financial opportunities.

Looking at promises for home buyers, Labor has proposed to increase the income caps under the “Help to Buy” program from $90,000 to $100,000 for singles and from $120,000 to $160,000 for joint applicants and single parents, though it is important to note that while this scheme has been legislated, the commencement date is yet to be confirmed.

The government has also promised to expand the “First Home Guarantee” scheme, which allows eligible first home buyers to purchase with a 5 per cent deposit and remove the pre-existing income test limits of $125,000 for singles and $250,000 for joint applicants, in addition to raising the property price caps.

The proposed commencement date for this legislation is also yet to be determined.