Neither Scott Morrison nor Bill Shorten understand the fear and frustration that dominates most in “retirement land”.
In the leaders debate Morrison forced Shorten to admit he was planning to tax some pensioners but that’s as far as it went.
Few “young” Australians aged under 50 have any idea what’s happening to their parents and grandparents.
And so, in today’s commentary I welcome all journalists (radio, TV, print social etc) plus all other readers aged under 50 to the land of retirees and those looking to retire.
For a great many Australians it’s a horrible place as they suddenly wake up that they are being saddled with the bill for a large portion of the banking royal commission. Whether pensioners or non-pensioners, they are being told they have had it too good and it’s time to have their income reduced.
And all this happens at a time when the costs of nurses and other medical bills are rising, while retiree income is under threat.
Unless you are very rich you no longer look forward to joining the fearful land of retirement.
When the royal commission started public hearings just over a year ago no retiree realised they would be personally lumbered with a big part of the bill.
As people get older, they usually become more conservative with their money. They sleep at night by investing in one-year bank term deposits. About a year ago those deposits yielded in the vicinity of 2.6 per cent. Now, one-year deposits with big banks are down to around 2.2 per cent. The Reserve Bank has not changed its official rate, so the money goes out of the retiree pockets into the bank coffers to pay for part of the royal commission.
If the official rates fall, then my guess is that the term deposit rates will fall again. But at least in term deposits everyone is in the same boat.
A lot of pensioners and self-funded retirees planned to vote for the ALP because they hated seeing three prime ministers in one term of parliament. But then came the horror of the ALP’s retirement and pensioner tax.
Many pensioners rely on small investments in high dividend-paying shares to legally supplement their income, but some pensioners are now told by Bill Shorten that they will cop it in the neck and lose their cash franking credits.
Once some pensioners get cash franking credits and others with the same money do not receive them then all pensioners know the politicians are playing games.
Shorten made it clear in his budget reply speech that cash franking credits were an unsustainable gift, so there is unease in the pensioner community.
Who is next?
It’s even worse among those who have larger sums in superannuation.
The industry funds are telling their members that “Uncle Chris” and “Uncle Bill” will look after them and will make sure industry fund members get their cash franking credit “gift” in full. Big retail funds are also being “looked after” but if they are losing working members, they may not be able to deliver the” gift”. Self-managed funds in pension mode are in trouble.
I keep getting asked by the “under 50s” how is it that Chris and Bill are delivering the cash franking credits to some superannuation fund members and not to others, assuming everyone has the same assets and income.
Australia has become the first country in the world to tax people not on the basis of their income or their assets but on the basis of who manages their money. It is an ingenious taxing system but it breaks all the rules we have built up in taxation since 1900 and, in my view, both Bowen and Shorten should be ashamed of themselves. Scott Morrison can take some of the blame for not nailing them on the unfairness of giving cash franking credits to some while withdrawing them from others. It should be all or nothing.
What Bowen and Shorten say to retirees is that if you happen to be in a fund with members who pay tax then you can sponge on the tax they pay and get your cash franking credits. All retirees know that their personal financial affairs have nothing to do with those of other members of a fund and to suggest that anyone can offset the tax paid by other members against the “no tax” paid by retirees in pension mode is artificial nonsense.
The retirees are hoping the cross benchers in the Senate will stop the nonsense scheme, but the ALP has already spent the money. Eventually all retirees may be taxed and those who have escaped round one are very fearful.
Many retirees want to downsize or move to a retirement home. Falling house prices make them very nervous and no one is sure what will happen when the ALP changes the negative gearing rules.
Young people say the Baby Boomers have had it too good and must now be punished.
When you are aged in your 60s, 70s and 80s and not rich (the rich escape ) it is a rotten time to be punished.
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