Our Prime Minister was in Port Macquarie last week purportedly to meet with “needy” retirees and pensioners. It has become clear after Rob Oakeshott’s exposing of the details of some of the attendees that Mr Turnbull and Mr Hartsuyker’s definition of “needy” can only be by comparing to Mr Turnbull’s own wealth.
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The Treasurer, Scott Morrison, described the Labor plan to abolish refunds of unused franking credits as “a cruel blow for retirees and pensioners” and Mr Turnbull stated “it will rob pensioners and low income earners.” But remember this system only affects certain shareholders.
The plan announced by Bill Shorten and Chris Bowen would restore the pre-2001 system: most taxpayers could still use imputation credits to offset other tax owing to the ATO but those with no tax liability – mainly retirees and their self-managed superannuation funds – would no longer be able to claim cash refunds. This is the only country in the world with an Imputation system that allows the tax office to pay excess credits to non taxpayers.
The Grattan Institute research highlights the government claim that “54% of people affected by Labor’s policy, some 610,000 individuals, have taxable incomes of less than $18,200 and that 86% of the value of all franking credits refunded are received by those with taxable incomes of less than $87,000 per year”.
The Institute shows how these claims are deeply misleading. Taxable income ignores the largest source for many wealthier retirees: tax free superannuation.
Are the Prime Minister and the Treasurer seriously suggesting that 610,000 retirees actually get by on less than $18,200 a year or nearly 20% below the poverty line?
If that were anywhere close to the real story, it would signal a full-blown retirement income crisis.
Whoever they are, Scott Morrison’s 610,000 ”low income-earners” are clearly not the poorest retirees. Few, if any are maximum rate pensioners. They are either part pensioners, or not receiving any pension at all, and they are drawing most of their income from tax free superannuation.
Under this new Labor policy about 33% will be affected, mainly wealthy individuals who own shares, 60% by self-managed superannuation funds (typically held by wealthier retirees) and the remaining 7% by super funds regulated by APRA. The poorest half of all retirees own less than 2% of all shares held directly. By contrast the wealthiest 40% of retirees own 97% of all shares held directly.
Bill Shorten has already stated Labor will ensure pensioners will be looked after, possibly by introducing a $1000 cap which will ensure most low income and pension recipients will not be any worse off.
As he stated “Failing to reform this unfair leakage puts an unfair tax burden on low and middle income working Australians” now and into the future. This current system costs the taxpayer $6 billion a year which can be used to help reduce debt, improve health services and education.
Alastair Fournel
Port Macquarie