Labor’s $3.75bn retiree savings grab revealed

Contrary to Bill Shorten’s claims, billions of dollars would be wiped from thousands of retail super funds under his plan to axe refundable tax credits for retirees.

Opposition Leader Bill Shorten. Picture: Brendan Radke

More than $3.75 billion would be wiped from almost 2000 small ­retail superannuation funds and 50 of the largest retail funds over the next 10 years, in a second-round hit to 2.6 million member accounts under Labor’s plans to scrap refundable tax credits for retirees.

In a direct challenge to Bill Shorten’s claim that APRA-­regulated super funds would be largely unaffected by the $56bn tax grab on retirees, updated Australian Tax Office figures due to be released show the majority of APRA funds claimed refunds for imputation credits in 2015-16.

The refunds assessed by the ATO amounted to $309 million for the year, which if averaged over the 10-year life of Labor’s tax policy would amount to $3.75bn, based on a 3.5 per cent growth rate.

While Labor’s policy would draw the bulk of the refunds from self-managed super funds — estimated to be $2.6bn — and high-wealth individuals, Treasury analysis of ATO data reveals the Australian Prudential Regulation Authority-regulated funds that would be affected represent 2.6 million member accounts.

Labor claims that only 10 per cent of APRA-regulated funds would be affected by the changes, but the government said the ATO data revealed that 2013 of the 2603 APRA-regulated funds received franking credit refunds worth $308,844,250 in 2015-16.

The majority of the funds had fewer than five people. Of the 2363 small APRA-regulated funds, 1963 received refundable franking credits worth $74m.

While the Opposition Leader has argued that the large retail funds would not be affected, the Treasury analysis reveals that 50 out of 240 of the large APRA regulated funds — comprising hundreds of thousands of members — received refundable franking credits worth $235m.

The 2031 APRA-regulated funds potentially affected are on top of the 200,000 self-managed super funds that were the primary target of Labor’s policy.

 

As people often hold more than one super account, it is estimated the number of people who are members of an ordinary retail or industry super fund that would be affected could be several hundred thousand and possibly more than one million.

The analysis used by the government contradicts claims by Labor and industry super funds that the policy would have little to no impact on the majority of funds because most imputation credits would be exhausted because of the tax liabilities of most funds.

The Association of Superannuation Funds of Australia has warned that retail investors could be affected by the policy directly through their superannuation funds as well as any shares outside their fund.

Mr Shorten was forced into a politically damaging change to the policy last month, two weeks after it was announced, following an admission that low-income pensioners with modest equities ­investments would lose annual franking credit refunds.

The strategic retreat to protect 300,000 pensioners and welfare recipients from the policy shaved $3bn from the $59bn that Labor claimed would be savings but which the government has ­attacked as a tax grab.

Scott Morrison said the new analysis meant that many pensioners and retirees stood to be hit twice by Labor’s plan.

“This is just another example of how shifty Bill Shorten has been over his plan to thieve the ­legitimate tax refunds of older Australians, now revealed to hit hundreds of thousands of Australians, including pensioners, through their super fund ­accounts, costing them around $3.75 billion,” the Treasurer told The Australian.

“Once again Labor’s retiree tax has been exposed as hitting pensioners and retirees on low ­incomes. This has occurred either through the further incompetence of his shadow treasurer, Chris Bowen, who has muffed this policy from day one, or Bill Shorten’s own menace in deliberately hiding the impact.”

Mr Bowen yesterday maintained that the only 10 per cent of cash refunds went to APRA funds.

“Labor was upfront when making the announcement on ­reforms to dividend imputation that 90 per cent of all cash refunds to super funds accrued to SMSFs with just 10 per cent going to APRA-regulated funds (based on 2014-15 ATP data),” he said.

“Industry Super Australia, which represents the superannuation of five million Australians, has said that Labor’s reforms ‘will have little or no impact on the super of most Australians’ and ‘super funds where most Australians have their retirement savings will be largely unaffected by this proposal because the imputation credits are exhausted offsetting tax liabilities of the fund’.

“The fundamental issue is that Australia can no longer afford to give out cash refunds — it is projected to cost the budget up to $8bn a year in the next 10 years.”

ASFA chief executive Martin Fahy said the industry was calling for a halt to any more changes to superannuation from both side of politics.

“Until legislation is drafted and the detail fully specified, we cannot be certain how many people or funds will be affected,” Mr Fahy said.

“ASFA remains concerned about possible unintended consequences of such a measure on ­retirement outcomes.

“Furthermore, we continue to call on politicians to cease tinkering with the superannuation system as it undermines confidence.”

Mr Shorten has defended the policy, claiming that the refunds are paid to a “few very wealthy people who are already very ­comfortable”.

Industry super funds, which are heavily influenced by union membership on their boards, have welcomed the policy but claim the proceeds should be ­reinvested to improve the super system.