THE Labor Party confirmed this week it will not change its $55 billion retiree tax. That follows shadow treasurer Chris Bowen’s arrogant dismissal of the concerns of more than a million Australians affected by the tax, telling them if they don’t like the policy, they should vote against Labor.
Make no mistake, the people being targeted by Labor have done nothing wrong except diligently plan and save for their retirement. The number includes about 240,000 people in Victoria.
These are people, like Rose, a schoolteacher in her early 50s living alone in a one-bedroom unit, who through her self-managed super fund is aiming to retire with savings that generate an income of $50,000 a year. Under Labor’s policy, she stands to lose more than $10,000 and is wondering if she should change her asset allocation and go on the pension. In the words of one of her colleagues, Rose is “distraught” and “doesn’t understand why Labor are going after the little people”.
“School teachers vote Labor,” her colleague said. “But come the election there is no chance.”
This is just one story of many reflecting the deep-seated anger in the community about the unfair and arbitrary nature of Labor’s retirees tax. It’s not unintended that Labor is sparing those in union associated industry funds, targeting individuals and self-managed super funds, for those are aspirational Australians who Labor consider easy targets. Indeed, under Labor’s plan, individuals will be on average $2200 worse off and self-managed super funds $12,000 a year worse off. No wonder Professor Ralston from the Alliance for a Fairer Retirement System said Labor’s policy was a “cruel blow” to retirees with the end result being to “drive many retirees on to welfare”.
How can Labor claim its policy is fair when a high-income earner on $200,000 a year with $7000 in share dividends receives the full benefit of their $3000 in franking credits, whereas Rose the 53-yearold teacher on a far more modest income is denied the benefit of her franking credits? Labor’s retirees tax falls hardest on low-income earners, particularly women. More than 80 per cent of those affected have a taxable income less than $37,000 and more than half of those affected are women. Of those women, two-thirds are over 60 and almost half are single or widowed.
What’s more, despite Labor’s claims, age pensioners are clearly hit. If a pensioner established a self-managed super fund after March 28, 2018, they fall foul of Labor’s retirees tax. So too people in a self-managed super fund who became a pensioner after March 28, 2018. That covers thousands of people and exposes Labor’s socalled “pensioner guarantee” as a lie and not worth the paper it is written on.
The flow-on impacts to charities of Labor’s retirees tax will also be profound. The Cancer Council of Queensland recently revealed a number of major donors advised they were “unlikely to be in a position to donate if this policy is introduced. There are bound to be many more donors for all charities in this position”.
Not only is Labor’s retirees tax bad policy, it defies two decades of bipartisan support for the current law. In 2000, Labor’s then shadow treasurer Simon Crean said of the full refundability of franking credits that “it improves the current taxation situation faced by low income investors, especially retired Australians”.
In fact, Labor’s official tax policy ahead of the 1998 election, and two years before the full refundability of franking credits was introduced, waxed lyrical about such a change, calling it a key reform and saying it “will be a significant benefit for older Australians, especially selffunded retirees on lower incomes” and “now completes the implementation of the imputation system”. For Bowen now to call full refundability of franking credits as “welfare for wealthy people” is hypocrisy in the extreme – against everything Labor has previously said. Voters are entitled to ask, what does Labor really stand for?
Faced with a barrage of criticism over Labor’s retirees tax, Bill Shorten quotes former British prime minister Margaret Thatcher and says he is “not for turning”.
The more fitting Thatcher quote that goes to the heart of the motive behind Labor’s $55 billion tax grab is that “the problem with socialism is that you eventually run out of other people’s money”.
As history shows, the Labor Party can’t manage money, so they are coming after yours.
Josh Frydenberg is the Federal Treasurer