Terry McCrann: Dividend plan is a blatant tax grab

BILL Shorten’s plan to abolish dividend imputation ­refunds is a tax grab and nothing else. It is not tax reform — it’s grabbing at more of your money to fund Labor spending, writes Terry McCrann.

WHAT next? Will Labor move next to stop anyone getting a normal tax refund?

That would be exactly the same as what it proposes with it move to end refunds in relation to dividend franking.

In the normal tax refund case, you are getting a refund of too much PAYE tax paid. You are not getting some sort of ‘gift’ from the Australian Taxation Office.

LABOR TO ABOLISH DIVIDEND IMPUTATION REFUNDS FROM ATO

Leader of the Opposition Bill Shorten. Picture: AAP Image/Dean Lewins

It’s exactly the same with dividends and franking: you are getting a refund of too much company tax paid on your behalf. You are similarly not getting a gift from the Australian Taxation Office.

The whole point of dividend franking — introduced by a LABOR treasurer, Paul Keating, of course — was to stop the double-taxation of dividends.

Dividends have to be paid by companies out of profits which have already paid company tax. In the old pre-Keating world those dividends would then be taxed a second time as personal income.

Under the Keating change you would get a ‘credit’ for the company tax paid on the dividend; you would then still be taxed at your full marginal rate on the underlying income out of which the dividend was paid.

Critically, if your marginal tax rate was lower than the 30 per cent company tax rate, you still paid “too much” tax. Although it took until Treasurer Peter Costello to actually overturn that overpayment.

MINIMUM WAGE INCREASE WOULD COST THOUSANDS OF JOBS

Leader of the Opposition Bill Shorten and Shadow Treasurer Chris Bowen. Picture: AAP Image/Dean Lewins

Yes, the big winners now are those that have big tax-free balances in their super. But the current government has already moved to undo the big part of that with the $1.6 million limit on ‘tax-free super’.

But Bill Shorten’s tax grab will hit hardest those who are genuinely on low incomes and desperately need their dividend refund cheque just as much as someone on a low normal income needs their normal refund cheque.

Let it be very clear: it is a Shorten — Labor tax grab and nothing else. It is not tax reform. It’s grabbing at more of your money to fund Labor spending.