Senior Labor figures unaffected by franking credits reforms that hit self-funded retirees hard

Labor’s elite will avoid their $56 billion attack on hundreds of thousands of Australians’ superannuation, and some will retire on nearly $200,000 a year.

Exclusive: Labor’s elite will avoid their $56 billion attack on hundreds of thousands of Australians’ superannuation, and some will retire on nearly $200,000 a year.

A News Corp Australia investigation reveals only two of Bill Shorten’s top-20 team members are likely to be among the 840,000 Australians hit by the ALP’s nest egg raid, which will leave some self-funded retirees on modest incomes with 15 per cent less to live on.

The Opposition leader himself and shadow finance minister Jim Chalmers are set to be unscathed by their plan to abolish cash refunds for excess tax credits on share dividends, as is Treasury spokesman Chris Bowen who last week dared those affected to “vote against us”.

Mr Bowen made the comment, which Treasurer Josh Frydenberg labelled “arrogant”, after being confronted by a self-funded retiree living on about $60,000 annually who said he would be $5000 a year worse off under Labor’s changes.

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Opposition Leader Bill Shorten and shadow treasurer Chris Bowen have locked in the policy. AAP Image/Richard Wainwright

Mr Shorten yesterday invoked Margaret Thatcher’s famous “U-turn” remarks to defend the policy, vowing “we’re not for turning.”

“Do people want a government with tax principles and fairness at their core or do they just want a lump of political putty?” Mr Shorten told the ABC

Some long-serving Labor figures such as Tanya Plibersek are likely to retire on nearly $200,000 because they are in a politician-only super scheme so generous their own party successfully fought to get it closed to MPs elected after 2004.

It’s understood Penny Wong and Anthony Albanese are in line for similar lifetime payments once they leave politics. Unlike most parliamentarians, neither discloses their super arrangements on the pecuniary interests register and they declined to comment.

Ms Plibersek’s office confirmed she was in the pre-2004 parliamentary defined benefits scheme but did not respond when later asked about the likely size of her lifetime pension. It’s believed she and other senior Labor figures in that scheme are in line for annual taxpayer funded retirement payments of nearly $200,000.

Anthony Albanese, Penny Wong, Bill Shorten and Tanya Plibersek. AAP Image/Tracey Nearmy

Analysis of the parliamentarians’ pecuniary interests register by News Corp Australia shows the only Labor luminaries likely to lose out in the franking credits crackdown are shadow Attorney-General Mark Dreyfus and Senator Kristina Keneally as they are in self-managed super funds (SMSFs).

And the impact of them is likely to be less severe than on retirees, experts said.

This is because workers’ SMSFs have to pay 15 per cent tax on earnings, against which half of their 30 per cent tax-paid franking credits can be used. For retirees paying zero tax, all franking credits are lost under Labor’s plan. Currently they are refunded as cash.

“It’s a more pronounced financial loss for SMSFs in retirement phase,” said H&R Block tax communication director Mark Chapman.

Industry funds, which often have ties to unions, and retail funds, pool the assets of their working and retired members. These pooled funds pay tax as an entity, not individual by individual.

Under Labor’s proposed changes they will be able to use their franking credits to pay tax on working members’ super earnings. So fund returns won’t fall.

Retirees in SMSFs typically have no tax bill against which to use franking credits. Labor will no longer let them have the credits as cash.

Seven of the Opposition’s top 20 are in the giant industry fund Australian Super — including Messrs Shorten, Bowen and Chalmers. It confirmed to News Corp Australia that net investment returns would not be impacted by Labor’s policy.

Chris Bowen and Bill Shorten’s super returns are unaffected by Labor’s policy.

Shadow minister for trade and investment Jason Clare’s fund Cbus also said it would be unaffected, as did one of the other funds Mr Chalmers is in, QSuper. It’s understood his third fund, with MLC, will also go untouched.

The Retirement Benefits Fund of Tasmania, which counts shadow minister for ageing Julie Collins as a member, said returns wouldn’t be affected.

Shadow special minister of state Don Farrell’s fund CareSuper is also unlikely to feel a hit, CEO Julie Lander said.

“We have taxable income from contributions and earnings against which the credits can be offset,” Ms Lander told News Corp.

Prime Minister Scott Morrison and Mr Frydenberg are expected to be no worse off under Labor’s policy, although Finance Minister Mathias Cormann is likely to be partially affected as he has an SMSF.

The independent Parliamentary Budget Office has estimated 840,000 taxpayers will be caught in Labor’s plan, which will strip them of more than $5 billion a year in cash refunds. Labor has said its move will save $56 billion over a decade which it will instead spend on education and health.

Senator Kristina Keneally’s SMSF will be affected.

Labor revealed the policy in March last year. Before the end of the month it was forced to rewrite it to exempt 300,000 full- and part-time pensioners.

Labor intends for the policy to take effect to take effect in July if it wins the election, which is likely to be held in May.

ANU associate professor Geoff Warren said Labor’s plan was “very, very clumsy”.

He said it introduced “wrinkles” that would encourage people to find ways to “game the system”.

“All sorts of weird and wonderful plans will be dreamt up to get round the changes,” he said.

Another consequence is that it could force self-funded retirees onto the pension sooner, with consequences for taxpayers.

Mr Bowen said 92 per cent of taxpayers would be unaffected by Labor’s reforms and that it was prioritising preschools, TAFE and hospitals while “the Liberals are defending … unfair and unsustainable tax concessions”.

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