TUESDAY, 27 MARCH 2018
SUBJECT: Dividend imputation reform.
GARETH PARKER: My first guest on the program, he’s the Shadow Assistant Treasurer Andrew Leigh. Andrew, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Gareth. How are you?
PARKER: I’m well, thanks. What has changed?
LEIGH: We’ve said from today that every pensioner will be able to benefit from cash refunds. Gareth, we’ve done this because we’ve always said we’d look after pensioners and because we want to make sure that Malcolm Turnbull has no longer any reason to be opposing this change. The notion of cash refunds just isn’t sustainable at a time when we’re looking to fund schools, to fund hospitals, to put important money into infrastructure in Western Australia. So this protects pensioners and allowance recipients from the change and sees that the cash refund change will only apply to those who aren’t on the pension and aren’t receiving allowances.
PARKER: So, if you’re pensioner or a part pensioner, nothing will change?
LEIGH: That’s correct.
PARKER: The big question then is what about who are self-funded superannuants, self-funded retirees?
LEIGH: Gareth, this doesn’t change the integrity of our policy, which is to say that Australia is the only country in the world that has a system of cash refunds for dividend imputation. The only country in the world that says that the Tax Office ought to be writing cheques out to people rather than assessing how much tax you ought to pay. That’s not an arrangement that would apply to most of your listeners. Most of your listeners would be thinking to themselves ‘how much do I owe the Tax Office at the end of the year?’. At a time when we have gross debt crashing through the half a trillion dollar mark, I don’t think it’s fair and I don’t think it’s good for growth to keep this tax loophole open.
PARKER: And that’s fine, as far as that goes, but some people have made plans, long term plans, and many of them are in a position where altering those plans at this late stage isn’t going to be all that straight forward.
LEIGH: Well, Gareth, you have to look at what the alternatives are on the table. Malcolm Turnbull’s saying that he’s thinks we ought to take money away from schools, take money away from hospitals. He wants to raise the pension age to 70, axe the energy supplement, abolish the pension supplement for pensioners who go overseas. They’re the decisions that he prioritises. Labor’s prioritises nation building, making sure we have great schools, that every kid who has the smarts to go to university gets a place. We don’t believe we should be cutting back on university places in order to-
PARKER: Ok, but the people who pay for those aspirations, Andrew Leigh – it seems some of them will be people who have, as I said in my introductory remarks, made decisions in good faith.
LEIGH: They have, but this is not a retrospective change. This affects dividends going forward. Look at the distributional impact: of the money that goes to people in self-managed super funds, half is going to people with balances over two and a half million dollars.
PARKER: Ok, so those people are people who are genuinely wealthy. So why not, say, just introduce a cap? So you can only get – I’ll pluck a figure out of the air - $10,000 cash refunds in any one year as an individual taxpayer?
LEIGH: It would still mean that if you had $10 million in your self-managed super account, you got to claim $10,000 under your proposal. Ours is considerably more equitable. We ask ‘are you on a pension or are you on an allowance?’. Australia has an incredibly targeted pension, as you well know. Both an income test and an assets test make it a much more targeted pension than in other countries. So when we ask the question ‘are you on the pension?’, we’re getting a good measure as to your assets and your income. That’s why we think it’s the right way of calibrating the policy.
PARKER: Ok. Can I ask Andrew if there is going to be a consequence here of people who look at these changes and they make a decision, a calculation about their own affairs and say ‘you know what, it’s actually not worth me trying to fund my own retirement, I’ll just spend my assets while I’ve got them and I’ll fall back on the pension’. That would tend to undermine the intent of this whole policy, which is to try to improve the budget.
LEIGH: I don’t think that would be a sensible decision for them. I don’t think it’s something that would be likely to occur in many cases. You certainly still have access to tax free income streams coming out of superannuation. Superannuation still receives significant tax preferred status. That’s because we do want people to continue to save for their retirement. There’s significant benefits to putting money in superannuation and to make strategic decisions for the future. But this one particular loophole, this uniquely Australian loophole, is costing the taxpayer $5 billion a year at the moment, going up to $8 billion a year. That is a huge amount of money and I don’t think it’s sustainable for us to keep that loophole open.
PARKER: Are you confident that you will raise all of the money that you have said you will, based on the modelling? Because there has been analysis in the financial press, particularly – which is technical – but the concept is that high net wealth individuals, the people that you say can and should pay more, will just simply reallocate their assets. They’ll take fully franked company dividends and put them in other accounts that can claim the full benefits of the refunds.
LEIGH: We’re absolutely confident. The Parliamentary Budget Office is an equal status coster to the Australian Treasury, so people should have as much confidence ion these costings as they would have in the federal government budget. The Parliamentary Budget Office didn’t come down in the last shower. They’ve looked very carefully at the effects that would be likely to flow from our policy and they’ve made their costings based on those assumed effects.
PARKER: Ok. Thanks for your time this morning, Andrew.
LEIGH: Thank you, Gareth.
Authorised by Noah Carroll ALP Canberra