Bowen brushes off the votes of thrifty retirees

Opposition Treasury spokesman Chris Bowen’s hubristic goading of older Australians who have saved enough during their working lives to be self-supporting in retirement was worse than a political or economic brain snap. Questioned on ABC radio yesterday about the cost of Labor’s crackdown on retirees’ dividend imputations, he retorted: “I say to your listener (who would be $5000 a year out of pocket): if they feel very strongly about this, if they feel that this is something which should impact on their vote, they are of course perfectly entitled to vote against us.” Too right. If the Coalition campaign team does its work well, that piece of advice should dog Mr Bowen all the way to polling day, with 50,000 voters across the 10 most marginal seats at risk of losing an average $2700 each.

Mr Bowen’s outburst was patent nonsense economically. He asked the public to imagine a system where “every shareholder in the country was a retired person who did not pay income tax and we refunded all the company tax”. It beggared belief that an aspiring treasurer should resort to such a ridiculous hypothetical scenario.

Far more seriously, Mr Bowen unwittingly revealed his disdain for a group of Australians who decent, competent leaders on both sides of the political divide should regard as model citizens and encourage today’s workers to emulate. Many of those who benefit from franking imputation credits are not wealthy — the ABC radio listener reportedly earns less than $62,500 a year from share-based superannuation. But they are self-starters by nature. They value their independence and have always tried to pay their own way. Welfare dependence would be anathema to them. Many of this cohort of citizens live frugally and spend their time productively — minding grandchildren, delivering meals on wheels, gardening, and supporting charities and their local communities. Most watch the pennies, a lifelong habit. After decades of hard work and thrift, most can afford to run a safe car and take an occasional holiday. Their dividend imputation refunds matter to their budgets. Some rely on them to catch up on power bills and restock the grocery cupboard.

In an era when 400 Australians a day are turning 75 and the ageing of our population is accelerating, any policy that punishes thrift and self-reliance is the last thing Australia needs. Mr Bowen makes much of the fact that abolishing the franking imputation concession would save the budget $11.4 billion over the forward estimates and improve the budget bottom line by $55.7bn over the decade. In reality, if the tax slug ultimately leads to a bigger uptake of the Age Pension — which already costs $50bn a year and is rising every year — the savings from Labor’s policy would evaporate quickly. Mr Bowen’s argument that the commonwealth spends more on cash refunds for franking credits than on public schools and the Australian Federal Police was not persuasive. State schools are a state responsibility. Nor is there a logical justification for forcing retired shareholders and those with self-managed superannuation funds to miss out on franking credits for dividends from companies that have already paid tax on profits earned. The policy amounts to double taxation.

Mr Bowen’s Labor predecessors were not so foolhardy. In 2000, Labor backed Peter Costello when he allowed taxpayers a cash refund if the value of their franking credits from dividends exceeded their tax liability. Simon Crean, Labor’s then Treasury spokesman, said the party had no difficulty with a reform that “improved the taxation situation faced by
low-income investors, especially retired Australians”.

Australian Taxation Office figures show the cohort that claimed the most from franking credits in 2015-16 was women aged 75 and older, who claimed $1.2bn, at an average of $6561. As former Reserve Bank of Australia board member Roger Corbett said on Friday’s front page, many of those affected by Labor’s policy are too old or not in a position to change their investment strategies. “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,” he said.

For investors tempted to change strategies, the policy could encourage them to abandon Australian equities and plunge their money into riskier assets such as property or overseas shares, as businessman Robert Millner warned in The Australian last week.

Conveniently for Labor’s trade union masters, union-backed industry super funds and retail funds would be ­exempt from the crackdown, leaving retirees in self-managed super funds and individual investors to carry the burden. According to the Treasury, ATO data shows 900,000 individuals would be hit, including the holders of 200,000 self-managed super funds. Labor’s push to target one of our nation’s most productive and responsible generations of citizens for achieving self-sufficiency and relative prosperity is profoundly worrying. It smacks of a philosophy grounded in the dead hand of class warfare and a desire to penalise success. Over time, this would harm the national interest, as well as people who deserve better.