Corbett slams ‘unfair’ ALP attack on franking credits system

Businessman Roger Corbett has launched a withering attack on the ALP’s policy to rip up the nation’s franking credits system.

Leading businessman and former Reserve Bank of Australia board member Roger Corbett. Picture Yuri Kouzmin

Leading businessman and former Reserve Bank of Australia board member Roger Corbett has attacked the ALP’s policy to rip up the nation’s franking credits system for dividends, savaging the plan as divisive and plundering the retirement savings of Aus­tralians who can least afford it.

The one-time boss of the ­nation’s biggest supermarket chain, Woolworths, former chairman of Fairfax Media and a former adviser to US retail giant Wal-Mart told The Australian the ALP policy would ruin the retirement plans of tens of thousands of people, many of whom were too old to switch savings strategies.

“I think anything that changes the rules for existing players should have a moratorium on it so if you are retired and you have retired on a particular basis and you have budgeted to do so and are depending on that, then for the government to change the rules, that will have an adverse effect on tens of thousands of people — I think it is wrong, it’s wrong,” he said.

Mr Corbett, a Liberal Party member, joined others from the business and investment community to decry the fact that union-backed industry funds, as well as many retail funds, would be ­exempt from the ALP crackdown on excess franking credit refunds but people in self-managed super funds or individual investors would be ensnared.

Billionaire investor Robert Millner said yesterday the ALP policy would create two classes of investors, with union industry funds among the biggest winners, while fund manager Geoff Wilson, who looks after $3 billion in savings on behalf of 80,000 investors, said a “two-tier superannuation system” would emerge from the policy.

“This proposed policy would create an unfair two-tier superannuation system in which industry funds can claim cash refunds and SMSFs cannot,’’ Mr Wilson said yesterday.

“Many market participants view this as a direct attack on the SMSF sector. This policy would force retirees to direct their retirement savings to industry super funds, which are major donors to the Labor Party,’’ Mr Wilson added. “Why should (industry funds) have the benefit and no one else? I think what will happen, if we do get a change of government, is we could get a divide in the community. Obviously the unions are speaking out on what they would like to be doing, but not everybody likes to be in the union.’’

It’s not the first time Mr Corbett has been critical of ALP policy. The corporate heavyweight was called on to resign from the RBA in 2013 when he attended a $500-a-head Liberal Party fundraiser for Tony Abbott.

Current ALP policy is to close down a concession that gives cash refunds for excess dividend imputation credits. Most industry funds and retail funds could still harvest franking credits because of the overwhelming dominance in these funds of workers still in ­accumulation phases rather than pension phase of their policies.

Franking credits wouldn’t offset the whole tax liability for accounts in the accumulation phase, effectively making industry funds exempt. But self-managed funds or individual investors would miss out on the franking credits refund.

“That is unfair. It’s quite possible industry funds beneficiaries are a lot better off than people managing their own super funds,’’ Mr Corbett said.

“Why do they (politicians), when there is any shortage of funds, the first thing they go towards is plundering people’s ­retirement savings?”

Home Affairs Minister Peter Dutton yesterday entered the debate that has gripped retirees, pensioners and the guardians of trillions of dollars in the nation’s retirement savings, accusing opposition Treasury spokesman Chris Bowen of trying to force through this policy and others because he was a student of former treasurer and prime minister Paul Keating and a handmaiden to completing Mr Keating’s unfinished business.

“Bowen would speak to Paul Keating every other day so he’s been very influential from a young age on Chris Bowen. So there’s a lot of Keating coming out — the worst of Keating coming out in Bowen, unfortunately,’’ Mr Dutton said on Sydney’s 2GB radio yesterday.

“And the abolition of negative gearing, the capital gains tax, the dividend imputation is a disaster for the economy. If you’ve got companies now, CEOs, fund managers, who are selling down or making decisions to cash in because they think Labor is going to be elected in May, then surely people see a message in that.

“But if you’ve got shares and you’re relying on that in terms of the dividend imputation, that is a disaster for you.”

Writing in The Australian today, Mr Bowen defends the construction and impact of his dividends policy: “In 2014-15, $5.9bn was spent on refunding dividend imputation credits. The commonwealth government in the same year spent less than this on public schools ($5.2bn). This can’t go on.

“We’ll put aside the fact that industry funds are jointly managed by unions and employers. The fact is industry funds are treated the same way as retail and bank funds. And all these funds pay tax. Allowing them to use franking to offset that tax is a fundamental principle of avoiding double taxation. In fact, it is tax refunds to non-tax paying SMSFs and individuals which is the anomaly in our tax system: no other element of our personal income tax system involves refundable credits.”

Mr Corbett, who last year was elected president of the Warringah Federal Electorate Conference to help Mr Abbott retain the blue-ribbon Sydney seat, said it would be more sensible for Mr Bowen to include a moratorium on any cutting of concessions that gives cash refunds for excess dividend imputation credits, to at least give Australians time to formulate long-term savings plans.

“It is not as though these ­people are extremely wealthy. They are people who have saved and invested and not consumed and have obviously conserved to provide for their retirement and I believe the ALP are wrong in proposing to change those rules.

“It might be all right for those people who still have a considerable amount of working life in front of them but it’s clear it [the ALP policy] will have adverse ­effects on tens of thousands.”

Speaking to The Australian yesterday, Mr Millner said the proposed ALP policy could also encourage investors to shift out of Australian equities and plunge their money in to riskier assets such as property and overseas shares.