Labor plan to stop cash tax refunds for share dividends to hit low-income earning retirees

MORE than half of the 79,000 South Australians who would miss out on tax refunds under a federal Labor plan have taxable incomes of less than $18,200.

• Tax refunds from shares capped under ALP plan
• Labor won’t offer compo for pensioners, says they will be better off

MORE than half of the 79,000 South Australians who would miss out on tax refunds under a federal Labor plan have taxable incomes of less than $18,200.

Federal Labor leader Bill Shorten has said his policy to stop cash tax refunds for shares was targeted at wealthy retirees. But Government statistics show the change would mostly hurt low and middle-income earners.

Revenue and Financial Services Minister Kelly O’Dwyer said the $11 billion tax grab would disadvantage 42,000 SA residents who earn less than $18,200.

More than 16,000 SA-based self-managed superannuation funds would also be hit.

“The overwhelming majority of people in South Australia impacted by this policy have a taxable income of less than $37,000,’’ Ms O’Dwyer said.

Federal Labor leader Bill Shorten. Picture: AAP / Julian Smith

“Bill Shorten classifies these people as “millionaires”, but these are Australians who have paid taxes their whole lives and want to live a comfortable, not lavish, life in retirement.

“Labor’s attack on more than one million Australian taxpayers needs to be called out for what it is — just another Labor tax grab.”

Dividend imputation allows Australians who own shares to claim tax credits so that company profits are not taxed twice. Under the Labor changes, investors would not be able to convert the tax credits into cash refunds from the Australian Taxation Office.

Labor argues that many wealthy retirees have low taxable incomes but high levels of untaxed earnings.

Mr Shorten has promised Labor will announce new measures to help aged pensioners.

Less than 15 per cent of the South Australian residents who would miss out on tax refunds have taxable incomes above $37,000.

The rapid ageing of the population makes SA retirees a potentially powerful voting bloc at federal and state elections.

Opposition shadow assistant treasurer Andrew Leigh yesterday said 92 per cent of Australians would not be affected by changes to dividend imputation.

Dr Leigh said the current policy was unsustainable.

“It’s the cane toad of Australian tax policy,’’ Dr Leigh told ABC radio.

“If we’re to make sure that we fund our hospitals and our schools properly, that we have a strong pension system, that we look after the most vulnerable, then we have to make sure we close these unsustainable tax loopholes.’’

Separate modelling released yesterday, prepared by former Treasury officials for Industry Super Australia, found 350,000 retirees across Australia would escape the changes if Labor put a $1000 cap on the tax refunds instead of scrapping them altogether.