One Liberal MP has referred to Labor’s franking credit proposal as an opportunistic grab at money as a new parliamentary inquiry into the consequences of making changes to the policy is launched.
Speaking to ifa, Tim Wilson, the member for Goldstein and chair of the House of Representatives standing committee on economics, said that Labor had looked at franking credits and thought it was an opportunity to take some money from Australians.
The MP chaired a parliamentary inquiry into Australia’s major banks last month.
“I think they frankly looked at it and thought here is a group of people who are less inclined to vote for us, who are elderly and less likely to be mobilised and it’s an opportunity to take back money,” he said.
Mr Wilson said the any change to the franking credit regime would impact Australians who were unable to change their circumstances.
“The change that Labor is proposing will directly hit the disposable incomes of many Australians often who are surviving on very limited income and their capacity to change their circumstances is virtually non-existent because they are not able to re-enter the workforce,” he said.
Mr Wilson said that Labor’s own policy announcements showed that they were treating the money from franking credits as foregone revenue for the government.
“It’s their (Labor) money to spend not the money that people have should have in their hip pocket and so it’s them prioritising the cash they have to splash in election over the interest and the welfare of retired Australians,” he said.
The policy proposal from Labor said that the party supports the franking regime and said that its policy to remove cash refunds would return billions to the economy.
“The policy will begin on 1 July 2019. This policy will save $11.4 billion over the forward estimates from 2018-19 and $59 billion over the decade to 2028-29,” it said.
The release said that to continue the franking credit refunds would impede on the government’s ability to offer world-class services.
“The Howard government’s decision in 2000 to allow individuals and superannuation funds to claim cash refunds for excess imputation credits is simply unaffordable and will impede the ability of future governments to pay for good-quality health and other services,” it said.
Mr Wilson argued though that the policy had not considered the changes in the tax system over the years.
“If you go back for instance what Labor did at the time around negative gearing for example, they removed negative gearing because there wasn't a capital gains tax and then introduced a capital gains tax to adjust to it,” he said.
“The same has been true of fully-franked dividends where you have had structural adjustments to company tax rates, income tax rates and there’s been an accepted principal around the full cash refunds.”
Mr Wilson said that Labor, through the policy, was targeting retirees who were independent and unable to change their position.
“Many retires have structurally designed their retirement around being able to receive fully franked dividends and will, if they are removed, have a dramatic impact on them and their welfare,” he said.
The SMSF Association said that data from the Parliamentary Budget Office (PBO) estimated that 1.2 million taxpayers would be affected by the change.
However, the SMSF Association argued that millions more could be due to the wide-reaching effects of the policies.
“The SMSFA does not dispute this figure but believes the inadvertent impacts of the policy will affect much of the population. For example, 1.1 million SMSF trustees in 600,000 SMSFs will be impacted by the change in policy,” they said.
Labor argues though that PBO data shows that 92 per cent of taxpayers do not receive any cash refunds for excess imputation credits.
“The PBO estimates that Labor’s policy: will not affect the vast majority (92 per cent) of individual taxpayers; and will affect around 200,000 SMSFs,” their policy announcement read.
Therefore, the inquiry had set up a website for the public to make their own submissions detailing how they would be impacted by the changes, said Mr Wilson.
“I think one of the things that has been missing in this whole discussion is the human voices about the consequences and how it is going to affect people’s households’ budgets,” he said.
Mr Wilson said the end goal of the inquiry was to give people an opportunity to air how they would be impacted by any change in policy.
“The end goal is to make sure that people who are going to be affected by this proposal have an opportunity to have that voiced out in the community. People are cautious about talking about their own personal finances in a public way, but for those people who do want to we want to give them the opportunity to stand up and be heard,” he said.
Labor Party shadow treasurer Chris Bowen declined to comment for this article.
Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).
You can email him on: [email protected]
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