Labor’s plan to cut tax refunds for shareholders and superannuation funds of self-funded retirees
SELF-FUNDED retirees — and even some pensioners — could have their tax refunds cut under a Labor plan to cap a credit system for shareholders and superannuation funds.
NSW
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SELF-FUNDED retirees — and even some pensioners — could have their tax refunds cut under a Labor plan to cap a credit system for shareholders and superannuation funds.
Opposition Leader Bill Shorten will use a speech in Sydney to launch plans to place new limits on dividend imputation refunds if Labor is voted into power at the next election.
Dividend imputation allows investors to claim a tax credit every time they are paid a dividend from the shares they own. If the credits add up to more than the tax they owe, a shareholder can claim a cash refund.
The majority of such refunds are paid to self-funded retirees with gross incomes of up to $87,000 a year. But Labor concedes that refunds are also received by some low-income retirees, including some people on the age pension.
Mr Shorten will brand the scheme in his speech as a “tidy little arrangement for people who already have millions of dollars.”
“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 is expected to say.
He said the plan will save the budget $11 billion over four years.
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The Coalition government has already targeted Labor’s tax policies — including a previously announced plan to clamp down on high-income earners using family trusts to minimise tax — as playing to the “politics of envy”.
Treasurer Scott Morrison last year blasted those policies as having a “flat earth view” of the Australian economy.
The dividend imputation credit system was created by Labor’s Paul Keating in 1987 to ensure company profits would not be taxed twice, and was expanded in 2000 under Liberal PM John Howard, to remove a cap on how many credits shareholders could claim.
Labor will point to statements by tax experts at major accounting firms, including KPMG and Deloitte, who have called the system a “substantial outlier” to support their policy.
Parliamentary Budget Office analysis shows about half of the total cash refunds go to the wealthiest 10 per cent of self-managed superannuation funds — those with balances above $2.4 million.
The top one per cent of self-managed funds receive an average cash refund of $83,000.
The PBO estimates Labor’s new policy will apply to the wealthiest eight per cent of tax payers, and will save $11.4 billion, largest over two years from 2020 to 2022.
The Australian Taxation Office only last month threatened to clamp down on the use of dividend imputation credits, after detecting a loophole where some superannuation funds would hold shares for only long enough to get the credits before selling them.