ATO not designed to be ATM for multimillionaires - Transcript, ABC Melbourne Drive

E&OE TRANSCRIPT

RADIO INTERVIEW

ABC MELBOURNE DRIVE

THURSDAY, 15 MARCH 2018

SUBJECT: Dividend imputation reform.

RAF EPSTEIN: Andrew Leigh, he is Labor’s Shadow Assistant Treasurer. He’s one of the local MPs in the ACT as well. Andrew Leigh, good afternoon.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER:  Good afternoon, Raf. How are you?

EPSTEIN: I’m good. Look, you’re raising a fair bit of revenue over a decade - $59 billion. Can you do that without hurting people who can’t afford it?

LEIGH: Raf, if you look at the way in which dividend refundability goes, about half of the benefits which are going to self-managed super funds are going to people with more than two and a half million dollars in their superannuation accounts. I don’t think the Australian Tax Office was ever designed to be an ATM for multimillionaires, to be writing cheques out to people who have very healthy superannuation accounts-

EPSTEIN: Can I stop you there, Andrew Leigh. Is that publicly available information, that half of the cash is going to people with a super balance of more than $2.5 million?

LEIGH: Yes, that’s the analysis that we’ve got of the benefits going to people with self-managed superannuation funds-

EPSTEIN: So where’s the analysis come from?

LEIGH: That’s the analysis that’s been done for us by a range of people, including the Parliamentary Budget Office.

EPSTEIN: I just want to try, I want to try to nail down some of the detail. I think that’s important, how many people are getting impacted who can’t afford it. The Prime Minister says more than half of the people affected by this have a taxable income of less than $18,000. Is he right?

LEIGH: But you’ve got to remember, Raf – as respected economist Saul Eslake pointed out yesterday – this is the same trick that he tried to pull with negative gearing. When you have someone with a low taxable income, that doesn’t necessarily mean they’re on struggle street. Refundability by definition is going to people with low taxable incomes, but you can manage your affairs such that you have a lot of assets which you’ve managed to get your taxable income right down. These are the people who are benefitting  from a system put in place when we had the rivers of gold flowing from mining boom mark one back in 2000, when John Howard and Peter Costello had the benefit of a structural budget surplus. Then it was costing the budget about half a billion dollars a year. Now’s it’s costing $5 billion a year, going to $8 billion a year – for a system that no other advanced country has.

EPSTEIN: I understand that. I guess, it is easy though to have what looks like on paper to be a good house but it’s costing you a bit to upkeep and to have a healthy superannuation balance, but actually not much income. There are people who’ve got decent assets but not much income and you are hitting them.

LEIGH: The very point of superannuation is it’s what you spend in your retirement. The idea of superannuation was never that this would be a way of providing tax free inheritance for your children. And the changes that were made in the year 2000 were unique to Australia, they were expensive at the time and they’re unaffordable now. They’re the cane toad of Australian tax policy. They’re not something that we ought to look back on with pride. We can do things better and the way in which Labor is approaching this, the way in which we’ve approached economic reform more broadly, is to look very rigorously at these tax concessions. If we can’t justify them, if they’re not doing anything for growth or equity, then we need to close them down so we can afford to invest in the schools and hospitals that Australians need.

EPSTEIN: I’ve had tonnes of people say that they’ve voted Labor for decades, they don’t reckon they’ve got much money and it’s going to change their vote. I think you’ve recognised that it’s going to impact hundreds of thousands of people. Have you miscalculated?

LEIGH: No. We’ve got very firm evidence from the Parliamentary Budget Office that this affects around one in ten full or part pensioners. Of full pensioners, we’re only talking about one per cent of full pensioners-

EPSTEIN: Nicely distributed though, across every marginal seat in the country.

LEIGH: Raf, you can’t make policy based looking at every little poll and every little marginal electorate. I didn’t get into politics in order to play slicing and dicing games with the Australian electorate. What I got into politics to do was to think hard about how we can improve our system in the interests of all Australians. Now we have gross debt crashing through the half a trillion dollar mark. We’ve got Malcolm Turnbull saying the way to deal with that is to push up the pension age to 70. They wanted to change pension indexation, so that it was linked to prices rather than wages. They still want to take away the energy supplement from pensioners. They want to raise taxes on someone earning $70,000 by $350 a year. Those sorts of changes are what you get when you’ve got a group of Liberals in charge who aren’t willing to make the hard decisions and serious economic reform.

EPSTEIN: 1300 222 774 is the phone number. We have had a lot of calls this week from people who feel that they are unfairly affected, so feel free to call. Andrew Leigh is the Shadow Assistant Treasurer, it means he’s part of the Opposition’s economic team. Isn’t your issue though, Andrew Leigh, that people who can afford to will just change the way they organise their savings and people who can’t afford to are going to lose money that makes a huge difference in their lives?

LEIGH: People can certainly adjust their behaviour according to this and indeed the Parliamentary Budget Office in doing their costings have taken into account those behavioural impacts. But let’s be absolutely clear. No one loses a cent from their super contributions. No one loses a cent from their pension. No one loses a cent from their share dividends. What happens is that no longer will the Tax Office write you a cheque. And that is an unusual situation for most of your listeners. I imagine most of your listeners are driving home from work at the moment, they’ve paid taxes on their wage and at the end of the year, the question will be ‘how much tax will I pay?’ They would never expect that the Tax Office would get to the end of the year and say ‘we’re going to write you out a cheque’ – for in the case of one bloke, two and a half million dollars through this scheme.

EPSTEIN: You’re basically asking people to trust you though, aren’t you? The way I’ve tried to put this in context for listeners is to suggest that this raises for you over the long term about twice as much as your negative gearing change. You are asking people to trust you that you can raise $60 billion over a decade and not hurt a lot of people who can’t really afford to be hurt.

LEIGH: Raf, I’ve told you about the distribution analysis done for us by the independent Parliamentary Budget Office, showing that half the benefits for people in self-managed superannuation funds are in the top tenth, which is people with balances over two and a half million dollars. You know Labor’s track record, our desire to invest in schools, in hospitals, to make sure our pension system is strong. We’re the party that built the National Disability Insurance Scheme. We’ve also got to make sure that we have great infrastructure and I really worry about flagging productivity, the fact that the economy has been flat lining-

EPSTEIN: Don’t go through too many of the wishes, I just want to focus on this if I can, because another way that people might judge this measure is what do you spend the money on? That is important. Is it going to income tax cuts for a broad swathe of people? Does it go to reducing debt and deficit? Where does the money that you raise get spent?

LEIGH: Well, Raf, because I can’t announce a new policy today, let me go to the heart of my main concern which is that we need to make sure we’re investing in future prosperity. Right now we’ve got a sluggish economy and it’s not clear where the next round of prosperity comes from. Our Australian Investment Guarantee this week-

EPSTEIN: Tell me you’re going to spend it on with the budget bottom line or another expenditure like a tax cut?

LEIGH: What I am telling you is the announcement that we’ve made this week around the Australian Investment Guarantee, which encourages firms to do more investment. Right now, investment is a huge challenge for our corporate sector-

EPSTEIN: It’s a nice idea, but it’s not an answer to the question.

LEIGH: No, it’s a direct answer to your question, Raf. We announced that expenditure-

EPSTEIN: So the instant depreciation comes off the money you’ve raised from this measure.

LEIGH: Absolutely, it does.

EPSTEIN: How much does it take care of? Like a fifth, a half – what sort of proportion?

LEIGH: It’s a small fraction of that, but it is a downpayment on future prosperity. We’re keen on making sure that when businesses are on the margin about making a new investment, we encourage them to do so.  Whereas the Liberals would get you to put money into corporate tax cuts which rewards last year’s investment, Labor’s Investment Guarantee guarantees that we get investment in the future. That’s the sort of way in which we’re keen to devote more resources into spurring the economy into action, creating more jobs and more opportunities.

EPSTEIN: Thanks for your time today.

LEIGH: Thank you, Raf.

ENDS

Authorised by Noah Carroll ALP Canberra


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