Flaw in Bill Shorten’s $2.5m cash refund claim exposed

The super sector warns that Labor has “grossly overestimated” the $59 billion revenue take from its tax crackdown.

Opposition Leader Bill Shorten. Picture: Nicole Garmston.

Bill Shorten’s claim that self-managed super funds are collecting $2.5 million in annual cash payments from refundable franking credits has been exposed as applying to only a “handful” of Australian retirees, with the sector warning that Labor has “grossly overestimated” the $59 billion revenue take from its tax crackdown.

As Malcolm Turnbull prepares to ramp up his attack on Mr Shorten’s “retiree tax”, the Self-Managed Super Fund Association yesterday labelled Labor’s assertions that Australians were receiving refunds of up to $2.5m each year as misleading.

SMSF Association chairwoman Deborah Ralston told The Australian that only a “handful” of self-managed funds would receive refunds in this vicinity and argued they would need to have “well over $100 million” in Australian equities.

In 2016, Tax Commissioner Chris Jordan told the SMSF Association national conference there were only six SMSFs that had more than $100m and just 2184 with a balance above $10m.

Ms Ralston called on the opposition to release its policy costings by the Parliamentary Budget Office, questioning whether it had taken into account a $1.6m cap on pension accounts introduced in July 2017. She argued the ongoing reference by Labor to $2.5m refunds for self-managed super funds suggested the projected $59bn revenue gain over the decade from its tax policy could be overstated. “It doesn’t seem to stack up from the numbers I’ve been looking at,” she said. “It’s extremely difficult to see how you could arrive at that total sum just running with the numbers and the average return to non-taxable retirees. It seems to fall short of the figure.”

Michael Rice — the chief executive of actuarial consultancy Rice Warner — told The Australian he doubted that any self-managed super fund would be receiving $2.5m a year from the tax credits on Australian shares.

Mr Rice also questioned the $59bn in revenue Labor expected to raise over the decade by scrapping refundable franking credits.

“I’d say that the fund would have to probably have well over $100 million in assets, all in fully franked Australian dividends, and it’s improbable that there would be such a fund,” Mr Rice said. “Maybe there is one or two. It’s unlikely.”

Labor has relied on 2014-15 tax data to justify its position. The ATO data shows the average ­refund for the largest 10 SMSFs in 2014-15 was $2.5m.

Opposition Treasury spokesman Chris Bowen yesterday accused the government of lying about the impact of the shake-up on low-income earners and reiterated the $2.5m figure.

“It’s about time Mr Turnbull explained why he thinks it is OK for people to get tax refunds of up to $2.5m who haven’t paid tax while making ordinary Australians wait until they are 70 to get the age pension,” Mr Bowen said.

Labor argues that 50 per cent of the benefit of the refunds goes to the top 10 per cent of SMSF balances, and yesterday used analysis by the Grattan Institute in a bid to ­debunk the government’s use of taxable-income thresholds as a benchmark for gauging the impact of the Labor policy on low-income earners. “Taxable income, the data that Mr Turnbull relies on, excludes income in the retirement phase,” Mr Bowen said. “The fact of the matter is that a lot of the income that people receive in retirement is tax-free. By definition, people are on low taxable incomes even if they have very significant superannuation balances, very significant indeed.”

The Prime Minister will escalate his opposition to the Labor tax plan today by travelling to the NSW electorate of Cowper held by ­Nationals MP Luke Hartsyuker, which has 2838 pensioners receiving franking-credit refunds under the existing tax arrangements, the largest number of any electorate.

According to the most recent ATO data from 2014-15, there are a total of 237,952 pensioners receiving franking-credit refunds across the country including 84,569 in NSW, 60,956 in Victoria, 42,721 in Queensland and 21,011 in Western Australia.

Mr Turnbull, who will today hold a roundtable with retirees, described Labor’s tax policy as a “cynical, unconscionable and unfair raid” on the savings of older Australians. “Bill Shorten is robbing pensioners and retirees of their tax refunds because he has run out of money in the budget,” he said. “Let me be very clear: these are not rich Australians. Bill Shorten is targeting mothers, fathers, grandmothers and grandfathers on low incomes who rely on a tax refund to help pay the bills.”

Mr Turnbull said he was working with Treasurer Scott Morrison to “ease the tax burden on middle-income Australians”, while meeting our commitment to return the budget to surplus in 2020-21”.