Less left to spoil grandchildren with paid parental leave scheme

I HAVE discovered just how hard it is to explain complicated, multi-billion-dollar policies in sweet, simple, sound-bites.

Retiree

I'VE got a newfound respect for politicians. The other night Tony Abbott and Kevin Rudd spent an hour debating the Coalition's paid parental scheme. Neither made much sense.

Yet when I was given about 60 seconds to explain it in my new gig on Channel 7's nightly news, I discovered just how hard it is to explain complicated, multi-billion-dollar policies in sweet, simple, sound-bites.

Here's what I think happened: in the heat of an election, the Coalition has made a balls-up of this policy, and Labor either didn't fully understand what they'd done, or couldn't work out how to make it easily understandable to punters.

So let me try.

First off (stripped of its spin), the Coalition's paid parental leave scheme is essentially middle-class welfare that's going to cost billions of dollars to fund.

So who's going to pay?

Contrary to newspaper headlines, it isn't big businesses earning over $5 million in revenue.

Yes, they are being hit with a 1.5 per cent levy (which to be honest, is really just a tax by another name), but they're also getting a tax cut of the same amount. So its net-net for them.

And it's not small businesses. They get the tax cut, but don't have to pay the levy.

Ironically, it's good old grandma and grandpa who will pick up at least part of the tab of having their daughters stay at home on full pay looking after their grandkids.

How? Stay with me. Things are about to get a little wonky. If you understand this then you'll be one up on Kevin and Tony.

The reason grandparents will pay, is because they will get less tax benefits from their superannuation.

Super funds (and all investors) get a credit for the tax paid by companies they invest in.

And if the company tax rate is lowered, this credit will be reduced by the same amount - which means grandma and grandpa will end up with a lot less money to spoil their grandkids.

Talking about "tax credits" to punters doesn't fit into the standard "slogans for bogans" that both parties employ so well.

It's complicated, and confusing.

And it shows just how tough an assignment it is to give taxpayers the real picture on how they're planning on spending our money.

And it's important - because this "afterthought" could potentially become a $1.5 billion slug on retirees, most of which are already struggling to pay their way.

Tread Your Own Path!

Question of the week: The Sneaky Girlfriend

Hi Scott,

I fooled around in my early 20s and managed to build up quite a substantial personal debt (I'm now 33). It was never an issue when I was single, living the life and earning enough money to pay the minimum repayments.

I thought I had enough money to go on overseas holidays but was scared I may run out of cash, so rather than using my credit card, I'd take out an extra personal loan.

The intention was always to return, work hard and pay it straight off. This never happened.

Then I met a lovely boy from the country. After 12 months of long-distance dating, I made the move to the country and thought it would be easy to find work.

Of course, I couldn't move until I went on one last little sneaky six-week overseas jaunt with my girlfriends.

Upon my return, I had a lovely man waiting for me. But I also had no job, no money and a $50,000 personal debt. Scary!

I am now working a job where I earn 50 per cent less than I used too and am struggling big time to make repayments, let alone live and contribute to the household. PLEASE HELP!

Danielle

Hi Danielle,

First things first: there's nothing "sneaky" about taking a six-week overseas holiday.

Now if I were Dr Phil I'd probably suggest that your holiday was a subconscious attempt to sabotage your new relationship.

But I'm the Barefoot Investor, and instead, my area of expertise is shaped by years of dealing with people who do stupid things with their money. So let me give it to you straight.

You're an 18-year old girl trapped in a 33-year-old woman's body. The real reason you went on the trip is because you've spent your entire adult life behaving like a teenager, and you correctly sensed that you were about to have to "grow up".

Don't ask, or expect, your boyfriend to help you out financially. Until he puts a ring on it, it's not his problem. You need to learn your lesson today - or you'll bankrupt him in 10 years.

The best outcome would be to prove to yourself that you're a strong, independent, mature woman who can mop up your own mess.

How? Well, by taking a second (or third) job, and smashing your debt in around four years. Unfortunately it's going to take some old-fashioned hard work.

Good luck to both of you.

Contact Scott Pape at barefootinvestor.com or [e-mail]