Dividend imputation ­refunds to go: Labor’s ‘double tax grab’ to hit pensioners, Finance Minister says

BILL Shorten has hit back after he was accused of shamelessly targeting pensioners with a new plan to secure an extra $11.4 billion for the federal budget over two years.

BILL Shorten has hit back after he was accused of “shamelessly targeting pensioners” with a new plan to secure an extra $11.4 billion for the federal budget over two years.

Earlier today, Treasurer Scott Morrison had slammed Labor’s plan to abolish dividend imputation ­refunds, calling it a “brutal and cruel blow for retirees” that amounted to theft.

The move, announced by the Opposition leader today, will impact more than a million taxpayers, most of whom are self-funded retirees and some of whom get the aged pension.

Mr Morrison said the move was essentially a double tax for pensioners and self-refunded retirees who received the tax refund.

But Mr Shorten has hit back, saying it was “complete rubbish” to call the plan a double tax.

He said the concession was unsustainable for the federal budget.

Currently, the concession costs the budget $5 billion but would blow out to $8 billion per year unless it was reined in.

“It’s not sustainable. It’s not fair. And what we’re doing is we’re clearing the decks to make sure that we have a stronger budget position, to make sure that we can fund our schools and hospitals,” he told reporters in Sydney today.

The Turnbull Government has slammed Labor’s plan, to be announced by Bill Shorten today, as a measure that will see self-funded retirees and some pensioners pay tax twice. Picture: Kym Smith

“The vast bulk of the dividend imputation scheme that we’re talking about reforming goes to the top end of town,” Mr Shorten said.

“The reality is that 50 per cent of all of the funds that come out of the budget and cash bonuses to people go to the top 10 per cent of SMSFs.

“I think most Australians would be surprised and appalled to discover that they go to work and pay their taxes, and that some self-managed super funds are able to get $2.5 million of cash bonus from the Government.

“That’s not what people pay their taxes for.

“So, Mr Morrison can run all the scare campaigns he likes. We’ve got an unsustainable tax concession.”

Treasurer Morrison had earlier said the Labor plan “violates terribly” the principle that if an Australian paid tax on something, they shouldn’t have to pay it twice.

“This today is a brutal and cruel blow for retirees, for pensioners even by the Labor Party’s own admission,” he told reporters in Canberra today.

“They are admitting that pensioners will be hit by stealing the tax refund off retirees and pensioners and low income earners,” he said.

“They can dress it up anyway they choose but that is the brutal reality of what the Labor Party have decided to do today.”

Finance Minister Mathias Cormann dubbed the plan “a $59 billion tax hike”.

“Whatever way you look at this, this is an increase in tax. It adds $59 billion to the tax revenue of the Commonwealth, if implemented,” Senator Cormann told ABC radio this morning.

Finance Minister Mathias Cormann says the dividend imputation system was designed to avoid double taxation. Picture: Kym Smith

Senator Cormann said the dividend imputation system was designed to avoid double taxation.

“Now shareholders in a company are part owners of that company and the reason there is dividend imputation is to ensure that the part owners of the company don’t end up paying tax twice effectively, and end up paying more tax than they should.”

Under the current system, Australians who own shares and whose marginal income tax rate is lower than the rate of company tax paid on dividends from those shares, receive a refund from the Australian Taxation Office.

Most of the refunds are paid to self-funded retirees with gross incomes of up to $87,000 a year but some low-income retirees who receive the age pension will also be affected.

Senator Cormann said abolishing the measure, introduced with bipartisan support by the Howard Government, was another example of “class warfare” rhetoric from the Labor leader.

“This is just shifty Bill at his worst ... using the language of class warfare and the politics of envy while targeting, shamelessly targeting, pensioners and self-funded retirees on lower incomes with what is a massive tax grab,” he said.

In his speech in Sydney today, Mr Shorten argued Labor’s plan would improve the federal budget bottom line.

“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,” Mr Shorten will say.

“These people will no longer receive a cash refund, but they will not be paying any additional tax.”

Shadow Assistant Treasurer Andrew Leigh called the refunds the “cane toad of tax policy”.

He told Sky News the refunds were small when they began but had become unsustainable for the federal budget.

.@ALeighMP on Australia’s dividend imputation system: It’s the cane toad of tax policy — something which is unique to Australia, might have seemed good at the time. But when we look at it retrospect, it simply isn’t sustainable.

MORE: https://t.co/vpGbcqU2eX#amagenda pic.twitter.com/ZKGVjOqe2R

— Sky News Australia (@SkyNewsAust) March 12, 2018

Shadow Treasurer Chris Bowen has also insisted no Australians will pay extra tax.

“This is a well targeted measure,” he told ABC radio.

“I understand people who will no longer receive their refunds will be unhappy but importantly no one will be receiving a tax bill.

“It’s not like we will be taxing people for the first time or somebody will start paying tax. But some people who have managed their affairs to get a tax refund out of dividend imputation will no longer receive it.”