Will tax proposal kill Bill at polls?

Will tax proposal kill Bill at polls?

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Bill Shorten has faced backlash over the ALP's plan to change the dividend imputation system. Photo: Alex Ellinghausen.

Bill Shorten has faced backlash over the ALP's plan to change the dividend imputation system. Photo: Alex Ellinghausen.

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ELDERLY mums and dads across Australia, not retired “fat cats”, will be the real victims of the ALP’s proposal to change the dividend imputation system if it wins the next federal election.

Aa

ELDERLY mums and dads across Australia, not retired “fat cats”, will be the real victims of the ALP’s proposal to change the dividend imputation system if it wins the next federal election.

As seniors’ groups draw battle lines against the proposal, which they say will rip $59 billion from investors – many of whom are retired and living wholly or partly on their investments – they say an unintended result will be forcing more people onto the pension.

One seniors’ organisation estimates 14,000 full age pensioners and 200,000 part-pensioners will be affected, while another warns the move would impact most of the 1.9 million Australians who are fully or part self-funding their retirement.

Pundits have warned that Labor could face a grey backlash at the next federal election if it proceeds with the proposal.

Franking, or imputation, is tax credits attached to dividends of Australian-listed companies, allowing shareholders to claim a cash refund from the Tax Office if the value of the tax credits exceeds the shareholder’s tax liabilities.

Many retirees have structured their retirement savings and investments around the tax credits and will face a significant drop in income if the proposal is implemented.

However, while an almost instant backlash from seniors forced the ALP into damage control, how or if pensioners and other affected retirees will be compensated remains the subject of mixed messages.

Shortly after announcing the proposal, federal Labor leader Bill Shorten said the part-pension would increase, only to have the situation “clarified” by his finance spokesman Jim Chalmers, who said there will be no direct supplement for pensioners.

ALP sources later confirmed that rather than a pension top-up scheme, it would look at a “mitigation strategy” that would see the extra $59 billion in revenue invested in personal income tax cuts and health initiatives, while those who lost money would have their income reassessed under a pension assets test that could see their payments increase.

What about ‘fairness and equality’

“ANOTHER example of the failure of governments and parliamentarians to understand and support the principle of fairness and equity for those who, through their careful and diligent management, in part or fully self-fund their retirement needs.”

That’s how the Association of Independent Retirees described the Labor proposal.

These sentiments were echoed by National Seniors chief advocate Ian Henschke, who said those affected were working-class Aussies, not former high flying corporate types with millions squirrelled away in superannuation funds and other investments.

“They have heeded the advice of financial experts that they need more than the age pension for even a basic lifestyle,” Mr Henschke said.

“So many of them invested in shares, the dividends from which would supplement their full or part pension to ensure they had a liveable ‘wage’ in retirement.

“If you think only the rich invest in the stockmarket and anyone with shares is living high on the hog, think again.”

Mr Henschke said Treasury had estimated more than 500,000 low-income earners would lose a yearly average of $1200 and the largest affected group had a taxable income of under $20,000 a year.

The Senior contacted Mr Shorten’s office for clarification on exactly what measures would be put in place to compensate or protect the incomes of those affected by the proposed policy. At the time of going to press no response had been received.

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