Scott Morrison accuses Bill Shorten of wanting to ‘steal’ from retirees who invest in stock market

Scott Morrison accuses Bill Shorten of wanting to “steal” money from pensioners and retirees who invest in shares.

Scott Morrison has accused Bill Shorten of wanting to “steal” money from pensioners and retirees who invest in the stock market, declaring Labor keeps “jacking taxes up” because the party cannot control its spending.

The Treasurer attacked Labor’s policy of axing cash payments for franking credits by calling it a “brutal and cruel blow” for retirees and pensioners.

He said the policy would force pensioners to keep their money in the bank in a low interest rate environment rather than encouraging them to earn more money in the share market.

He said the dividend imputation system was designed so shareholders did not pay tax twice: through their dividend earnings and on the tax of the companies they have a stake in.

“(Labor) are not dealing with loopholes here, what they’re doing is creating them,” Mr Morrison said.

“It is unfair to steal someone’s tax refund, I wouldn’t do it on your tax refund as a normal income tax payer and I’m not going to do it for pensioners and retirees who are simply making smart decisions in an environment like this where they can get a better return on buying shares,” Mr Morrison said

“What do you want them to do, go and live on 2 per cent and put it in the bank?

“That is what they are going them to do and I don’t think that is smart, I don’t think they have thought it through, it is a brutal tax grab.”

Mr Morrison likened the policy to “theft” because it forced shareholders to pay tax twice.

“That just shows a Labor Party that has an insatiable appetite for higher taxes, their only attitude towards the budget is higher taxes, that is all they ever talk about, let the spending rip uncontrollably ...because you can always keep on jacking up taxes,” he said.

“Bill Shorten has made something crystal clear today to the Australian public: if you want higher taxes, vote Labor, if you want lower taxes vote Liberal and Nationals.”

‘Shifty Shorten’s $59bn tax hike’

Finance Minister Mathias Cormann slammed Labor’s proposed dividend imputation changes as a “$59 billion tax hike”, savaging Mr Shorten as “shifty” for claiming the reform was not a tax increase.

Senator Cormann said the Opposition Leader’s proposal to axe cash refunds for excess imputation credits was part of Labor’s plans to “come after” thrifty Australians to fund the party’s “reckless spending scheme”.

Labor’s new policy - to be formally announced by Mr Shorten this morning - is expected to save the budget $59bn over the next decade.

“It is a $59bn tax hike, whatever way you look at this, this is an increase in tax, Labor can come forward with this proposal but they shouldn’t try and dress it up as something it isn’t,” Senator Cormann told ABC radio.

“It adds $59bn to the tax revenue to the commonwealth if implemented and what it shows every Australian yet again is that if Bill Shorten became prime minister of Australia next year no Australian would be safe from his higher taxing agenda.

“Whether you are a worker, a saver, a homeowner, an investor, a professional, a small-business owner, whoever you are Bill Shorten will come after you with more than $200bn in higher taxes so far and counting to fund his reckless spending scheme.”

Senator Cormann said axing cash refunds for people who have more dividend imputation credits than tax liabilities would mean some investors would pay more tax than they should.

“This is just shifty Bill at his worst, trying to play firstly on his political rhetoric, using the language of class warfare, politics of envy while shamelessly targeting pensioners and self-funded retirees on low incomes with what is a massive tax grab,” Senator Cormann said.

“Shareholders in a company are part owners in that company and the reason there is dividend imputation is to ensure that the part owners in the company don’t end up paying tax twice.

“If you were on low income you would actually end up, as part owner of the company, paying more tax than you should and the refund is a reflection on that.”

‘We’re ready for scare campaign’

Opposition treasury spokesman Chris Bowen says he is bracing for an intense “scare campaign” against Labor’s policy to crack down on dividend imputation but warned the system was unaffordable and needed reforming.

Mr Bowen said Labor’s new policy to axe cash refunds for excess imputation credits was given the tick of approval by former Labor prime minister Paul Keating, who was the architect of dividend imputation when he was treasurer in the Hawke government in 1987.

Mr Bowen said the Howard government made the system unaffordable by giving cash refunds to people who had more imputation credits than tax liabilities. The imputation cash refunds are projected to cost $8 billion a year which is more than the commonwealth spends on public schools and childcare, he said.

Mr Bowen said it was mostly used by wealthy people with self-managed superannuation funds.

“I fully expect a scare campaign from the government, I fully expect self-managed super in particular to be unhappy about this, some people have managed their affairs to maximise their refunds, I accept that but we are giving plenty of notice an incoming Shorten Labor government will reform the system,” Mr Bowen told ABC radio.

“Two thirds of the refunds accrue to tax free superannuation, around 90 per cent of those go to self-managed super and more than half of the cash refunds go to self-managed super with balances of more than $2.5m and 82 per cent go to balances with more than $1m.”

Labor’s policy, to be formally announced by Bill Shorten in a speech in Sydney this morning, was reported by The Australian this morning.

Mr Bowen said the move was part of Labor’s “boldness” to crackdown on tax benefits for the wealthy, which includes proposed changes to negative gearing, family tax trusts and capital gains tax.

“Labor under Paul Keating introduced dividend imputation in 1987 and between 1987 and 2000 it worked well,” Mr Bowen said.

“John Howard and Peter Costello changed the system to enable people to get a cash refund even though they haven't paid tax, that was perhaps sustainable at the time when the budget was in surplus and the mining boom was on but of course it locked in permanent expenditure on temporary revenue, and it has blown out, it now costs around $6bn a year and is projected to grow to $8bn a year in expenditure.

“We don’t think it is sustainable in this budget environment, we think it is necessary, we understand it is controversial, we understand the government will engage in a scare campaign ... but this is a necessary reform.”