The government and the corporate media have pulled out all the stops to try to convince many people that the rich need taxpayers to keep writing cheques for them. This is done by way of excess franking credit refunds. I have explained how this is done before, but just in case you have forgotten, I’ll explain it again.
The Labor Party has announced a policy which states they will get rid of cash refunds for excess imputation or franking credits. The system of franking credits was introduced by Paul Keating in 1987 to prevent the double taxation of company profits. A company makes a profit on which it pays tax (in most cases; many large companies don’t pay tax, anyway). After the tax is paid, the remaining profit is distributed to shareholders. This used to be taxed again as income for the shareholder at their top marginal tax rate, so Keating decided that to prevent such double taxation, he would institute what were termed franking credits, which effectively got rid of the tax payable on that income to the shareholder, as it had already been taxed at the company level. That seemed fair. However, Costello extended this to allowing individuals and superannuation funds to claim cash refunds for any of these imputation credits not used to offset their tax liabilities1. These cash refunds comprise money the rest of us taxpayers have paid as tax. We taxpayers are giving money to people who own shares and have arranged their income so as to pay no tax. This is effectively taxpayer-funded negative taxation for the wealthy1.
While the government has, as you would expect, claimed this is a ‘retirement tax’, it is anything but. It is simply removing a subsidy to the wealthy, which was done as a favour by Costello in the great game of mates. People like Cormann and Frydenberg have been lying by omission when they have said that retirees will pay more tax. That is simply a blatant lie. In addition, they commonly do not include the adjective ‘taxable’ when referring to retirement income. Indeed, the government has stated that Labor’s plan would hit some of the lowest paid among Australians with 84% of individuals impacted on incomes of less than $37,000. The RMIT ABC Fact Check determined that this was misleading, and that is being polite, as it is what you and I would call a lie. They are lying by omission. This is because that $37,000 is only ‘taxable’ income and does not include the largest source of income for many retirees, and that is superannuation, and the balance of this can be up to $1.6 million before any tax is payable on income from it2. To give an extreme example, one very wealthy individual has arranged their affairs such that their taxable income is zero. However, they do have significant shareholdings and under the Costello excess dividend imputation credits system, every year they get a cheque from we taxpayers for about $2.5 million. That is equivalent about 10 cents from every man, woman and child in the nation, going to just one person.
As I said above, the government has pulled out all the stops, to the extent they have mobilised their mates to whine about this Labor policy. There is a piece by Olivia Caisley in The Australian (where else?) and relates a story about a meeting in the RSL club in Merimbula at which people voiced their concerns about Labor’s proposed crackdown on franking credits. This is misleading as the crackdown will be on franking credit refunds, not the credits themselves. One of those featured in this story was a John Gaul (aged 80), who was a little strident in his condemnation of Labor’s plan. He stated that it was a “death tax” and a “blatant, unfair, deliberately targeted discrimination” that would prevent him leaving any inheritance to his three children. That is an abject lie as his house, shares and anything else will be inherited by them. He said that like most of us, he had paid tax all his life and that he receives no (presumably government) pension and having “supported the public purse, they are now not taking from it”. But then Caisley states that Labor is proposing to seize part of that self-created retirement income. This does not gel, because the only thing that the Labor Party is trying to stop is precisely money from the public purse going to shareholders; nothing else. So, Caisley has either badly blundered and believes that all franking credits are to be stopped, or Gaul does in fact get a cheque from the public purse annually. There is lying here, but it is lying by omission, as neither Caisley or Gaul found it worth mentioning that Gaul is (or was) president of the Merimbula-Eden branch of the Liberal Party4. Enough said?
Another rant against the Labor plan is by Geoff Wilson in the Sydney Morning Herald, which may say something about the decline of the Sydney Morning Herald (SMH) more than anything else. Wilson, being a self-appointed spokesman for all Australians, has stated that Australians believe tax policy should be equitable, progressive and reliable, a statement with which not many would disagree. However, then he states that Labor’s “plan to scrap full tax refunds on dividend income fails each of these principles by reintroducing double taxation and changing the rules … under a system that has remained fundamentally unchanged for 18 years”5. This is a lie. These are not tax refunds. The company has paid tax on these profits and the resultant dividends go to the shareholders. The shareholders do not pay tax on them as the dividend imputation system will still continue; it is only those shareholders who pay little or no tax who will now not get cheques from the public purse. There is absolutely no double taxation. Wilson should be ashamed of himself, as should the SMH, for publishing this drivel.
In the disclaimer at the bottom of Wilson’s piece, he states that he is the chairman and chief investment officer of Wilson Asset Management. So, he has a vested interest in watching the money keep rolling in to the coffers of his wealthy investors, even if it is from the public purse. On that topic, modelling based on the Australian Bureau of Statistics data has indicated that 95% of franking credit refunds go to the wealthiest 50% of individuals (65+), while 54% of the franking credit refunds go to the wealthiest 10% of individuals (65+)6. So, for the government to refer to this as a retirement tax is, as usual for the Liberal Party, just another lie. As I said above, it is simply taxpayer-funded negative taxation for the wealthy.
As with the previous example from Merimbula, there are several omissions here. Firstly, Geoff Wilson is Liberal MP Tim Wilson’s cousin (Tim Wilson’s great grandfather is Geoff Wilson’s grandfather), and Tim Wilson is an investor in Geoff Wilson’s fund. What relevance is this you may ask? It is because Tim Wilson was chairing a parliamentary committee supposedly investigating the Labor policy; a most unusual occurrence. Such committees usually examine government rather than opposition policies. In addition to this, Geoff Wilson contacted his cousin Tim to ask for parliamentary hearings into Labor’s proposed policy to be scheduled at the same time as his own six-monthly investor roadshows (both happened on November 20). As these are parliamentary committee hearings they are funded by the taxpayer, and currently $160,000 has been spent on venues, accommodation and travel7. Furthermore, if one wanted to attend one of these hearings, one had to register via a website and had to agree to sign a petition being put together by cousin Geoff Wilson. This had to be pointed out to Tim Wilson before the website was changed to not make this mandatory. As Labor MP, Matt Thistlethwaite, said: “Not only did he [Tim Wilson] create a blatantly partisan website, but it now appears he has an interest in a company that is leading the charge against Labor policies”7,8. The fact that MP Tim Wilson could even consider doing something so party political and expect taxpayers to foot the bill is mind-boggling and demonstrates how entitled he considers himself. Couple that with the fact that Prime Minister Scott Morrison thinks this sort of taxpayer-funded party political use of parliamentary committee hearings is perfectly acceptable is an absolute disgrace. Can you imagine the squealing from the Coalition parties if the Labor Party had tried such a stunt as this. This government are desperate and will stop at nothing to try to retain power. I have been watching Australian politics for several decades and I have never seen such a venal corrupt government.
UPDATE: Now there is a group masquerading as a grassroots organisation named ‘Defenders of Self-Funded retirees’ who say they are formed by “hard-working Australians who reject Labor’s proposal to impose double taxation and to demonise us” If they are retirees being demonised by the Labor Party, then how can they be hard-working? Clearly, this ‘organisation’ has been formed by people who aren’t the sharpest tools in the shed. This sort of oxymoron immediately makes one suspect that a politician is behind it. It seems that this is the case. The association is managed by Liberal Party member and ACT Senate candidate Robert Gunning and some of his ‘mates’ from the trucking company lobby. Company records show that Defenders of Self-Funded Retirees Ltd is owned by Canberra-based Lobbyist Andrew Higginson, a friend of Gunning’s from the Gold Coast (does he wear white shoes?), one Robert Harrison and a John Richard Evans9. Like all these other bogus Liberal Party efforts purporting to represent retirees, they lie when they call the Labor plan a retirement tax. They are just more spivs with their hand out for bags of money from taxes you and I have paid.