While the Labor Party was defeated in the South Australian State Election on the weekend, it was buoyed by a federal win in the Batman by-election in Victoria, prompting Bill Shorten’s resolve to restore “fairness” to the budget by pushing ahead with targeting cash refunds for wealthier Australians who own shares – with a twist.
After significant backlash over Shorten’s ‘tax grab’, recently revealed modelling suggests that a minor adjustment the initial plan may relieve retirees of the full burden of the reform. The policy is expected to raise over $5.6 billion each year.
The new modelling, prepared by Treasury officials for Industry Super Australia, could mean around 350,000 retirees won’t lose cash refunds from the Australian Tax Office that would otherwise be used to cover the franking credits on their dividend incomes.
The Opposition Leader hinted at plans to adjust the policy by placing a $1000 cap of cash refunds instead of cancelling them entirely.
Mr Shorten claims he is on the side of older Australians, saying: “When it comes to pensioners, pensioners are always going to do better under Labor.”
“We want to decrease the gap and out of pocket costs paid for by pensioners. We don’t support the Turnbull Government creating the world’s oldest pension age, the age of 70,” he said at Ged Kearney’s press conference yesterday.
“So, we’re far more fair dinkum on pensioners, and we will have more to say in the future about our good deal for pensioners.”
Treasurer Scott Morrison on Sunday called the Labor plan “sneaky” and “shifty” labelling the cap on refunds as bad policy.
“Bill Shorten is saying to the Australian people ‘give me all of your money and trust me about what I’ll do with it’. We don’t agree with that. We don’t think any government should say that to Australians. That’s why we want to keep taxes as low as possible,” said Mr Morrison.
Analysis of Labor’s policy revealed that age pensioners account for about $238 million of the $5.6 billion annual revenue. A $500 cap would reduce that to $170 million, while a $1000 cap would take that number down to $130 million.
Self-funded retirees over 65 would account for $645 million a year. The $500 cap would reduce that to around $520 million and a $1000 cap to about $445 million.
The policy will primarily target about 200,000 self-managed super fund holders and investors with low taxable incomes but large share portfolios.
According to the analysis: “Fine-tuning the policy to ensure pensioners and retirees with smaller parcels of shares are not affected would be quite inexpensive because the burden of the policy falls elsewhere.”
“There’s a need for members to be reassured that the impacts on them are likely to be insignificant, if they exist at all,” said Industry Super Australia Chief David Whiteley.
What do you think of Labor’s proposal? Will you be affected by the ‘tax grab’?