All Age Pensioners will now be excluded from Labor’s plan to axe franking credit refunds should it gain government in July 2019.
The revision of the original policy, which was announced two weeks ago and budgeted to raise $59 billion over 10 years, was cleared by the shadow cabinet yesterday.
The backflip comes after widespread criticism that the policy did not take into account the impact on retirees with low incomes.
Labor Leader Bill Shorten has now vowed to exclude 306,000 pensioners – 277,000 older Australians on full or part pensions and 29,000 on Disability Support Pensions, carer payments, parenting payment, Newstart and sickness allowances.
Labor says the revised policy would collect $55.7 billion and keep 94 per cent of the revenue while removing one-quarter of the Australians originally affected by the policy. The financial burden would now rest on 893,000 individuals and self-managed superannuation funds (SMSF), with 200,000 SMSFs the prime target.
The new terms have been ‘grandfathered’ to exempt any SMSF with at least one pensioner or allowance recipient before 28 March. The Wednesday deadline seeks to prevent pensioners quickly setting up SMSFs or some SMSFs signing up a pensioner to gain an exemption.
“Self-managed superannuation funds with at least one pensioner or allowance recipient before 28 March 2018 will also be exempt from the changes,” Mr Shorten said.
“This means that every pensioner will still be able to benefit from cash refunds.”
The chief executive of the Council on the Ageing, Ian Yates, told Fairfax Media he had spoken to Labor for two weeks to get a fairer outcome for pensioners.
“A purist policy would include pensioners but that’s not the real world – and it’s not where the money is, anyway,” Mr Yates said.
“If you’re a full or part pensioner, you’re not rich.”
How do cash refunds work?
Dividend imputation was introduced by the Hawke-Keating Labor government in 1987 to prevent so-called double taxation of company profits. This meant that shareholders did not need to pay tax on their dividends, for which the company had already paid tax.
However in 2000, the Howard-Costello Coalition government amended the policy, making it more generous for SMSFs and self-funded retirees.
Are you happy with the backflip? Did you support the original policy?