Labor targets wealthy retirees with $59b tax plan

Font Size:

Opposition Leader Bill Shorten has declared war on wealthy Australians who own shares with a plan to raise $59 billion over the next 10 years by axing cash refunds for excess imputation tax credits claimed by super funds.

Mr Shorten will announce the scrapping of the rebate in a speech to the Chifley Institute at the KPMG offices in Sydney today. This weekend, Labor faces a threat from the Greens as it seeks to hold onto the marginal seat of Batman.

Mr Shorten says the policy change will target about 200,000 of an estimated 600,000 self-managed super funds (SMSF) in Australia. A small number of “low-income, high-wealth” retirees would also be affected.

The policy would not apply to 92 per cent of the 12.8 million Australians who lodge annual tax returns, he says.

“Every dollar that slips through these loopholes is a dollar that cannot be invested in the Australian people and their potential,” Mr Shorten will say, according to a copy of his speech.

“Every dollar allocated to tidy little arrangements for people who already have millions of dollars is a dollar that can’t be used to repair the budget and bring Australia back to surplus.

“Firstly, this change only affects a very small number of shareholders who currently have no tax liability and use their imputation credits to receive a cash refund. These people will no longer receive a cash refund, but they will not be paying any additional tax. Let me repeat that, a small number of people will no longer receive a cash refund, but they will not be paying any additional tax.”

Mr Shorten claims the policy would return the imputation system, originally designed to stop double taxation, back to the original design implemented by the Bob Hawke-Paul Keating Government in 1987.

The scheme was expanded by the Howard Government in 2000 and changed again in 2006.

“The Howard-Costello subsidy entirely distorts the original design of the dividend imputation system,” Mr Shorten will say.

“In fact, it makes Australia the only OECD country with a fully refundable dividend imputation credit system. And every dollar our opponents spend on preserving exemptions for the top end of town is a dollar they have to cut from schools and hospitals, extracted from middle Australia in tax increases or forcing taxpayers to pay more interest on the nation’s debt.”

The Labor policy, according to Fairfax Media, is aimed at raising $5.6 billion in 2020 and a similar amount every year, equivalent to about $4800 on average each year for every taxpayer affected.

Do you agree with the mooted changes if Labor were to win office? Would you be affected?

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

RELATED LINKS

Stop SMSFs gambling with their super, says expert

Government urged to act in this year's Budget.

SMSF performance falls short of APRA-regulated funds

SMSF ownership unlikely to be beneficial to those with lower asset levels.

Women the big losers in our super system

Women retire with $113,000 less super than men.

Written by Janelle Ward

293 Comments

Total Comments: 293
  1. 0
    0

    Absolutely agree. The system was introduced so that there would be no double taxation i.e. the company paying tax and then the shareholder also having to declare that tax on their personal tax return.
    BUT, people who DON’T pay ANY tax now receive that tax that the company paid as a cash refund!!
    They pay NO tax remember so they are not being double taxed as the system was designed to address. So, why should they then receive a refund?
    The proposal is for those very high wealth people and those with very clever tax arrangements who pay no tax at all, but, still receive Billions of dollars every year in refunds from the tax office.
    Those people will not receive the refund BUT will NOT be paying any extra tax!!!
    The current system is a GROSS distortion of the intended plan,the same as the 50% reduction inn capital gains tax, both implemented by a government desperate to retain power and causing massive repercussions on the overwhelming majority of Australians just to benefit the few.

    • 0
      0

      Yes, but the ”taxation” is paid multiple times because of the assets test depriving people of the pension. This is another STUPID brain fizz that hasn’t been thought out. Many of those affected don’t have incomes as high as the aged pension. They will have a much greater incentive to squander their savings, gift them, or over-invest in housing.

      Double taxation? Many affected are paying tax again and again and again and again and again. They paid tax when they put earned the money. They paid tax on the investment earnings. And now they pay a huge penalty for having those assets because they don’t get a pension. How much more can retirees take? Shorten will NOT be elected if he pursues this IDIOTIC policy change.

    • 0
      0

      Correct OGR – the entire tax system and retirement packaging system needs to be overhauled NOW, and the Hidden Tax On Retirees via the assets test should be abolished forthwith and replaced by the UGRI (below), and income,fringe benefits and self-gifting through companies taxed above that according to the income tax scales.

      If everyone was paid an UGRI, and tax came in at the tax free threshold – $18,200 plus single pension $23.254.40 = each individual (if all were paid at single pension rate – another issue), would earn $41,454.40 before any tax kicked in – and that at the lowest level.

      In order to accrue $18,200 at (say) 3% – a person would need income-bearing assets of $606,000+. All personal assets (under my scheme) would not be included.

      So it stands to reason that the vast majority of shareholders who jump and run and hide whenever ‘tax’ is mentioned in relation to their shares -would NOT be affected at all, many would be affected marginally if at all by paying at the lowest rate of income tax, and ONLY the fattest cats would pay.

      The fear-mongering from the fat cat set is all about protecting themselves from paying ANY tax- and anyone who falls for it is a fool, pure and simple.

      To get to the next level of income tax – $37000 – at 3% return on investment you would need to have a shares portfolio of $1.23million – and not too many have that.

      You may juggle these figures as you like… I’m not sure what the current returns on shares are and they vary per portfolio, of course, but the figures are pretty simple.

    • 0
      0

      Correct OGR – the entire tax system and retirement packaging system needs to be overhauled NOW, and the Hidden Tax On Retirees via the assets test should be abolished forthwith and replaced by the UGRI (below), and income,fringe benefits and self-gifting through companies taxed above that according to the income tax scales.

      If everyone was paid an UGRI, and tax came in at the tax free threshold – $18,200 plus single pension $23.254.40 = each individual (if all were paid at single pension rate – another issue), would earn $41,454.40 before any tax kicked in – and that at the lowest level.

      In order to accrue $18,200 at (say) 3% – a person would need income-bearing assets of $606,000+. All personal assets (under my scheme) would not be included.

      So it stands to reason that the vast majority of shareholders who jump and run and hide whenever ‘tax’ is mentioned in relation to their shares -would NOT be affected at all, many would be affected marginally if at all by paying at the lowest rate of income tax, and ONLY the fattest cats would pay.

      The fear-mongering from the fat cat set is all about protecting themselves from paying ANY tax- and anyone who falls for it is a fool, pure and simple.

      To get to the next level of income tax – $37000 – at 3% return on investment you would need to have a shares portfolio of $1.23million – and not too many have that.

      You may juggle these figures as you like… I’m not sure what the current returns on shares are and they vary per portfolio, of course, but the figures are pretty simple.

    • 0
      0

      Shorten is a fool, and his Treasurer, Chris Bowen, is pathetic and cannot come up with any decent ideas. Bowen helped Labor to lose the last 2 elections, and will do so again.

      Trebor, no need to say it twice! However, I agree with your comments “If everyone was paid an UGRI, and tax came in at the tax free threshold – $18,200 plus single pension $23.254.40 = each individual (if all were paid at single pension rate – another issue), would earn $41,454.40 before any tax kicked in – and that at the lowest level.” as a possible solution, i.e. an Universal Aged Pension system without Assets or Income Tests based on Single Rates only, but with actual Income taxed above specified limits after allowing capped non-taxable income from Super.

      BTW, I cannot understand how the wealthy can get an actual refund if they are indeed wealthy – get the tax loopholes removed, the morons in Labor! Implement a Minimum Tax system based on Gross Income! Then they don’t need such stupid rules to plug holes!

    • 0
      0

      I so agree George, especially about that pathetic excuse for a shadow treasurer – Chris Bowen – God help us if he get’s his hands on the nation’s coffers.

    • 0
      0

      Double tap – not something you do to your friends. Don’t know how that happened.

  2. 0
    0

    About time.

    • 0
      0

      Yep! Let’s just eliminate ALL gain from working and saving and make EVERYONE poverty-stricken in retirement. Great idea? Tax them over and over and over again, deny them any pension benefit, make them blow all their savings and live out their old age in hardship. And when NOBODY wants to work or save, ask WHY?

    • 0
      0

      Read again, Rainey. Do some figures…. you’re jumping up and down and responding to the fear-mongering of the real fat cats.

    • 0
      0

      Mork you must be one of the few who don’t have any money tied up in a super fund? It doesn’t matter what fund you’re in because ALL Super funds will be affected. This is a time when you really shouldn’t believe the bullshit!

    • 0
      0

      I bring you the AGRO….. you won’t get a concession for money deposited in a super fund, but you won’t be taxed on that income derived from that investment, either, since it is set aside and untouched for retirement.

      ONLY when you retire – if your income AFTER you are paid your AGRO is sufficient – you will pay some tax, ONLY on the income.

      It’s a good deal.

    • 0
      0

      It’s a good deal for people who have a pension, or for those who have high incomes and pay tax. As usual, it stuffs the retirement plans of the hard-working, self-sacrificing battlers who saved for a reasonably adequate retirement but are a long way from wealthy.

  3. 0
    0

    I suppose every politician will be immune though

  4. 0
    0

    It is not only wealthy people who will be affected. I get a nice little bonus every year which is much appreciated.

    • 0
      0

      It forms a substantial portion of the income of many low income earning retirees who don’t qualify for a pension. They will have a strong incentive to dispose of all assets, spend up big, and put their hands out. Is he TRYING to wreck the economy?

    • 0
      0

      Guess a lot of retirees will dump their shares and invest in other assets. What will that do to share prices?

    • 0
      0

      Can you explain in plain English why you should get a tax refund when you pay no tax?

    • 0
      0

      as I understand it Trebor, I get a tax refund from my few shares because the company paid this tax on my behalf although my total earnings for the year put me below the tax threshold. So I am only getting back what tax I paid in the first place through franking. The franking system is in place to ensure investors who are liable to pay tax cannot avoid it as it’s paid before dividends are distributed.

      The oppositions plan is to treat income from share dividends differently from other sources of income and that is an unreasonable proposition.

    • 0
      0

      So….. how exactly to YOU go about paying for franking?

      Dividends are paid out of net profit, neh (or theoretically so – but we know that isn’t the accounting’ case – if it were countless companies permanently in the red would not e giving out dividends.

      If the company you hold shares in pays tax on the income from which you derive dividends, and then claims that as a tax deduction… even though that tax paid by the company may reduce the dividend pool – HOW are you paying for it?

      That company is simply paying its way, as it should. You are simply receiving income, and are thus liable for tax on it. If the tax paid by the company offsets your personal liability -the tax you are liable for should be neutral – not negative so as to recoup a return.

    • 0
      0

      Trebor, the bottom line is that we all calculate tax incorrectly. Net tax = total tax paid LESS total benefits/pensions received. So in fact many pensioners pay far less tax, despite having earned far more over a lifetime, than those who scrimped and saved to be as self-sufficient as possible in old age.

      We pay tax on earnings. We pay tax on investment earnings. Then we are tax over and over again in retirement by not getting a pension. And yet people with minimal incomes are denied a tax rebate while the wealthy fat-cats who earn enough to pay tax still get their franking credits. Not sure how anyone can justify that! But what I can be certain of is that a massive dump of shares will follow this policy introduction, probably driving more investment in – guess what? REAL ESTATE. Pushing house prices up further! Great idea! Got a problem. Let’s introduce DUMB policies to make it a thousand times worse.

    • 0
      0

      Yes – but you’ve got to have money in continuity to have all those things, Rainey – try working like a dog for years and then being dumped and ending up with zero assets and starting again.

      I fine life experience and will solidify your thinking.

      The retirement packaging system is flawed, we all know – and unbalanced towards the fat cats – and deliberately so.

      That is the problem. People with a little share portfolio imagine themselves tycoons, when the reality is that the majority of any shares in any corp etc are held by an insider few. the rest are just punting and hoping the horse will run on the day, since they are unsecured and are not in receipt of remuneration for board member, president etc that the insider group hand to themselves.

      You don’t seriously believe all those stories about poor bankrupt business people, poor as church mice, while they continue to live in multi-million dollar mansions etc, do you?

      You don’t really think they’re ‘one of us’, do you?

      If YOU went bust the bank would want your home…. but if you use cut-outs – all is good…

    • 0
      0

      Trebor, I DID work like a dog for years to pull my family out of extreme poverty, and then I worked like a dog to ensure my partner and I didn’t live in poverty in old age. If I didn’t now work, well past retirement age, I’d be draining my limited savings at the rate of $25K a year, rising with inflation, just to keep pace with a pensioner. And that’s NOT counting the $38,000 I’ll pay out this year in medical costs for my partner and I, and the $9,000 I’ll pay out in about two years to save my eyesight. Like many, I worked like a dog and saved to cover those costs, and now, if I didn’t work, that saving would be costing me so heavily that it would be worthless. But because I work and pay tax, I’ll keep those franking credits. How is that reasonable?

      The tax is paid by the company. To only give it back to those with high enough incomes to pay tax is yet another gift to the rich at the expense of the battlers who keep this country afloat. It’s unjust. It’s STUPID in the extreme. And it will harm the economy.

    • 0
      0

      I see your point, Rainey. This system needs a full review and full rationalisation.

      I also have a vague idea that healthcare should be part of full pension, but like many such thought bubbles, I’ve done no costing etc, so I’m on a par with government of two parties on that one.

      It always seems, with all of these issues, to come down to government shirking its responsibility for revenue capture from those who are making off with the mine.

      I’ve panned the ‘globalisation’ trade deals the Cambra Clownshow sign us up to, and strive to find ways to raise this country out of its deepening and darkening morass.

      I have only the power of the written word, since at heart I am an extremely shy person- so no – I am not politician material, just an advisory type.

    • 0
      0

      Shorten is most probaly flying a flag. There may be a revised version sometime in the future. He knows that a lot of pensioners/part pensioners and small SMSF’s receive only a few thousand in Imputation credit whilst the top ten percent of SMSF’s receive about 90% of the credit.

      Labor will most probaly set a sliding scale, like our current tax scales. The imputation credit will be paid for the first $xx then as you get more and more credit you receive less and less credit until you reach, say, 47%.

      Then again the idiots in Canberra should review the entire income/tax system and make it simpler than it currently is (and implement it).

      It is all too hard for them and they will lose the donations from their masters, because their masters receive considerable considerations from their lap dogs.

    • 0
      0

      What an utterly STUPID way to apply tax. Complicated, Potentially very unfair. Loopholes everywhere!

      The refund of franking credits is CORRECT AND FAIR. It ensures tax is paid at the appropriate rate for each recipient of dividends. If the wealthy are escaping the tax net, then increase the top tax rate and reduce the claimable deductions. Changing tax on dividends to make the poorest pay more than their appropriate rate is NOT a solution, no matter how it’s modified and played with.

  5. 0
    0

    Typical union approach to be divisive, convince the working class that all the problems of the working class are because the rich have too much and it should be re distributed and given to the the less well off in society. I am not sure I understand exactly what Shorten is trying to do, is he complaining that people who have shares that have the tax paid on them and then claim the tax back at tax time because their income is below the threshold so are therefor not liable for the tax paid? He is stating he is going to collect $5.9 billion each year for 10 years and he is collecting this tax from 8% of tax payers, sounds like a nice fairytale Bill, for those on this site that also have an interest in UK politics, Jeremy Corbyn has been using the same divisive tactics and trying to create a rift between the so called rich and poor.

  6. 0
    0

    If you are paying NO TAX get that No tax why are you receiving the imputation credit as cash. You have already and stil will receive the dividends. You will still be able to claim imputation credits to reduce tax. All you will not do is reclaim money you did not spend on imputation credits. You are lucky there are imputation credits. You are lucky to have enough shares to allow you to reduce tour taxation to zero. It will not affect those on low income, only those on high income. It is time to stop payments like these. It is also time to stop the tax avoidance with negative gearing, and trust funds. It is thought out and it is a great idea. The only people complaining are those who have wealth and accountants that abuse the tax loopholes set up by Howard and Costello to give money to the haves

    • 0
      0

      The imputation credit is like a receipt from the taxation dept that confirms your share company has paid part of YOUR dividend to the tax dept to hold (they like holding money) until the financial year is over.The money is then applied towards any tax you have to pay or be REFUNDED to you depending on your income.The money was always yours and not the tax depts.
      The number of shares you own does not reduce your taxation to zero.Would like you to give me an example if you would be so kind.

      If you think stopping people getting a refund is closing some loophole then you agree that its ok for a persons income to reduce by 14% (next door neighbour) whose income last year was approx. $7000 which included $1005 of franking credits.No he doesn’t get any govt benefits.I gather you think he is wealthy too.

    • 0
      0

      So what we’re talking about here is the ATO not trusting companies to do the right thing, so they hold a portion of imputed dividends in case the whole shemozle drops out, so the board etc can’t do a runner with it?

      Show me the link… I’d like to follow this up properly and fairly.

    • 0
      0

      Time for your afternoon nap, Concerned! This is all too much for you to take in. I hope you and Bill will live happily ever after – he will be ok – he has got his indexed tax free parliamentary pension to look forward to – and the rest of us can go to…..

    • 0
      0

      Concerned, what this proposal does is continues to give a substantial benefit to higher income earners, and deprive low income earners of thousands per year. They ARE paying tax by not being dependant on the taxpayer for pension handouts. They are losing up to $36,000 a year because they saved, and now you want them taxed AGAIN! Great idea! While all those who DON’T save get up to $36000 a year (or more with concessions and rent assistance) out of the taxpayer purse, let’s tax the savers who save the country $36000 or more per year ANOTHER FEW THOUSAND ON TOP OF WHAT THEY ARE PAYING BY NOT GETTING A PENSION. But ONLY if they have a low income. Leave the rich alone. Just PRETEND you are attacking the wealthy.

      Well, all I can say is when there isn’t enough to pay pensions because all the savers were attacked and forced into hardship, I hope the idiots who supported these attacks enjoy their starvation diet.

  7. 0
    0

    Touch my super and you won’t get my vote. In fact with the feminist crap you go on with you probably won’t get it anyway. But who do I vote for ? The Libs are unacceptable so what’s left?

    • 0
      0

      No one, Tib!
      If you don’t have a decent Independent to vote for, choose whoever is closest as a Retiree supporter as your first choice, and more importantly, ensure you Vote Last the current seat-warmer from Liberal, Labor or Greens in particular.

    • 0
      0

      George I can see why so many Americans don’t vote. Some days I feel like throwing my vote in the bin.

    • 0
      0

      The only way that I can see to cause a major disruption is to vote for Independents and remove the main parties. America voted in a Maverick and will have to put up with the fallout for 4 years, BUT, the message will be loud and clear….The people Choose the Govt.
      ….Spread the message….Don’t vote for the major parties.

  8. 0
    0

    Hmm ‘wealthy Australians’- ‘wealthy retirees’…..

    Companies are one legal entity -the shareholder another. both gain income and thus both are subject to tax.

    It’s a bit like negative gearing and concessional capital gains – you either get one or the other, but you don’t get both, should be the rule.

    Now if a person owns shares and those shares earn income – that income should be subject to income tax. If the company has already paid it, that income tax should be neutral, and under no circumstances should a shareholder receive a tax refund for not paying tax.

    Wrong, wrong, wrong.

    Need for a Universal Aged Pension (Universal Guaranteed Retirement Income – AGRI – what’s a word starting with O so it can be AGRO)) to cover those who are retired, and then income tax is levied against share dividends in toto (small town north of Tasmania – very wet climate). In most cases the amount recouped from share dividends, after taking into account tax free threshold, would be neglible – so I can’t see why the whining…. the only ones caught out would be the fat cats who’ve already had their sweet ride, mostly through a tax concessioned income during working life in many ways.

    As for those Australians NOT retired but wealthy – they should be fairly paying the taxes… and definitely not copping a refund on top of dividends because the current rules allow a company to pay tax on dividend money first. How many free rides do they want?

    No wonder the cost of living is getting out of control for the many, while the few romp home with riches for doing nothing.

    It’s daylight robbery.

    • 0
      0

      Damn that’s UGRI – not AGRI… ummm …… Australian guaranteed Retirement Offset…. that does it – AGRO!!

      Right now – all AGRO applicants take a number and sit down and wait….. that’ll work….

    • 0
      0

      Better still call Colonel C’Link on the phone – that’ll get you sorted out for AGRO much more quickly……

      Just funning…. the Australian Guaranteed Retirement Offset is a solid policy and a core promise….. I’d hate to make all my constituents AGRO… but they will be anyway based on that core promise…. so I guess I’ll just have to make you all AGRO so you won’t be so aggro…

      Torture a pun long enough and it will yield up no truth but only what you want to hear…

  9. 0
    0

    Labor will not be taking the money from you. They will just not be paying you money after you have used facitilities – I take it you do go to the doctor and collect the refund, you do drive on roads, paid for by TAX but you pay no TAX NO TAX NO TAX. Can you not see this is a little tipped in the direction of those that already have wealth.

    • 0
      0

      So, what you are saying in effect is that if you pay no tax you have no right to complain because you use all the services and facilities that the tax payer has paid for, the likely hood is that people who have earned enough to have a few shares have worked hard all their lives paid tax at an extremely higher rate than is the case today, but you don’t think they are entitled to recoup the tax that has been paid on the earnings from their shares, keeping in mind you can only recoup the tax if your total income is below the tax free threshold. So continue to tax the retirees even if their income is below the threshold, what a great idea and typical of the left wing who want to continually create a divided people otherwise there is no platform for them to be voted in by creating a false us and them scenario it’s called the politics of envy.

    • 0
      0

      Once more around the park, Jim – we are ALL taxpayers – every transaction involves taxation, so every time we buy a beer of back a horse (legit) the Guv gets its cut….The House Always Wins….

      Many become bogged down over Income Tax, but that is only a small part of taxation, and the reality is that even those who currently pay no income tax usually have paid income tax all their lives – and those in retirement are now drawing on that part of Income and Other taxes that should rightly be going to their retirement.

      Instead, it was hijacked into ‘consolidated revenue’, a monumental act of theft, and was thus turned into a politician’s slush fund and plaything.

      For those who are concerned over the ‘cost’ of social security – you should equally be looking at EVERY aspect of government expenditure to see where the REAL Black Hole costs are. NONE is sacred, and NONE has more importance than social security.

  10. 0
    0

    Shorten our super is not your piggy bank.

    • 0
      0

      Saw the thing coming – took all my super out when I was 64 years old
      in one go. Had to give a reason why and stated in writing “fear of
      Govt cash grab in the future”. Was told by the Super people that was a very good reason. Spent the lot or almost the lot on things I liked doing like travelling the world and now Bill Shorten does not worry me one little bit and I sleep well at night. People 60+ should possibly look at such a scenario as well and young people will just not contribute one extra dime in super. Good one Bill!

    • 0
      0

      the labor socialists want to tax the self funded pensions only and not once but twice and forget they get their Government pensions tax free which all taxpayers pay into . Bill Shorten is a bloody liar and divisive and spends spends our money

    • 0
      0

      It’s all of them, fred- not just Shorten – they get you one way or another.

Load More Comments

FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Health news

Australians want to die at home - but do we achieve that goal?

How do you want to die? More than 70 per cent of Australians want the end to come at home,...

Retirement

Rise in 'grey divorces' sparks warning from legal experts

More Australians are divorcing later in life, leading to "unique, confusing and overwhelming" challenges for couples aged over 50. The...

Entertainment

Friday Funnies: Short jokes for the shortest month

February flies by too fast, just like these short but sharp jokes. What is the recipe for Honeymoon Salad?Lettuce alone...

Health

The four types of hearing loss explained

Research indicates that one in six Australians has some form of hearing loss.  Hearing loss refers to reduced hearing, which...

Dinner

Fabulous Fish Pie

It should go without saying that a fish pie needs to have lots of big chunks of fish in it,...

Food

Succulent Spice-Roasted Salmon

These little salmon bites are something I've made time and time again over the years and this method of roasting...

Photos

How to take great pictures of gardens

If you've never been too good at taking pictures of your beautiful blooms, now's the time to brush up on...

Aged Care

Paid on par with cleaners: the broader issue affecting aged care

Paid on par with cleaners: the broader issue affecting the quality of aged care Ben Farr-Wharton, Edith Cowan University; Matthew...

LOADING MORE ARTICLE...