It is anticipated that a very few people understand the impact of changes to dividend imputation and franking credits that the Labor Party announced in 2016 but it surely is one of the current hot topics for a discussions as elections draw closer. And, those who are affected and understand the impact have calculated that removing the perk substantially reduces their retirement income and are passing on the knowledge to others. The change is especially meant for those who are drawing an income from their superannuation nest egg while also receiving tax credits based on their shareholdings. National Seniors Australia chief advocate Ian Henschke stated that he had received no guidance from Labor about whether older Australians who had restructured their finances to receive the Age Pension would be exempt from the crackdown.
The magnitude of the change can be gauged from the Australian Taxation Office statistics which show that 170,614 women aged 75 and over claimed $1.2bn in franking credits worth an average of $6561. This compares to the 159,380 men aged 75 and over who claimed $955,109 in franking credits over the same period worth an average $5993.
As the discussion grows hot, shadow treasurer Chris Bowen responded arrogantly last week stating that anyone who felt angry about the policy was perfectly entitled to vote against them. Bowen added that the $55 billion policy had already been road-tested in a series of by-elections. He was unapologetic about his statement and conveyed clear message that he was reluctant to budge on the subject, if Labor came to power. He added that they were not concerned about the Liberal Party scare campaign on what they intended to implement. Bill Shorten defended Chris Bowen stating that the latter was merely pointing out there was a choice in policies.
At the same time the party also added that they thought it was appropriate that they shut down generous but unsustainable tax concessions. Mr Shorten stated that Labor would be a better choice than the current government for retirees because it would lower electricity bills, make private health insurance more affordable and unfreeze the Medicare rebate for patients.
On the other hand, Scott Morrison responded by stating that Mr Shorten will give the “two-fingered salute to retirees” if he becomes prime minister as the government ramps up its attack on Labor’s $55.7 billion dividend imputation crackdown. While Labor is unlikely to lose seats on the back of the policy, senior party sources have admitted it could have an impact in seats it is targeting to take from the Coalition.
Our analysts reckon that though the Labor party doesn’t appear likely to take a U-turn on their stance this time but within weeks of announcing their original dividend imputation policy last March, Labor had backtracked under pressure from seniors groups, setting up a pensioner guarantee that quarantined those on government pensions or allowances with individual shareholdings. So, it would be wise to keep a close eye on the developments and see if they announce and stick to similar concessions when the final countdown to the elections has begun.
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