It’s rich v the poor, Shorten declares

AUSTRALIANS are being asked to decide if it is fairer to keep giving retirees billions in cash refunds on taxes or use the money for essential services such as education.

The tax debate has erupted into a policy showdown with competing Labor and Government positions on how best to use some $60 billion over 10 years.

The Government is marshalling half a million pensioners and self-funded retirees to attack Labor’s plan to end a multi-billion dollar tax refund measure dubbed “millionaire welfare” by Opposition Leader Bill Shorten.

Treasurer Scott Morrison told ABC radio yesterday: “Labor has deliberately hit 230,000 pensioners.”

The Government is also pleading the case for 200,000 retirees with self-managed superannuation funds it says will be hurt by Labor’s policy.

Mr Shorten told the Nine network yesterday the measure was unsustainable.

“John Howard introduced this idea in 2000 when the Government had a lot of money. We don’t have a lot of money anymore,” he said.

“And I’ve got to choose hospitals and schools and agedcare facilities over paying people money, refunds for income they haven’t paid.”

He conceded “about 10 per cent of pensioners, and there’s two and a half million pensioners, will have a minor impact”.

At issue is the operation of a 30-year-old concession on dividends. In 1987, the Labor government introduced dividend imputation – franking – to prevent company profits being taxed twice. The profits were taxed at source and it was considered unfair for the aftertax profits to be taxed again as income when shareholders received dividends.

In 2000, the Coalition government, with Labor support, allowed people who paid little or no tax to get a cash refund from the ATO on franked dividends. A succession of recent reviews of the tax system have warned the growth in the refunds is draining revenue.

The measure had a relatively low cost to revenue nearly 20 years ago, but will soon cost $6–8 billion a year.

Labor says savings from its reforms would add $59 billion to the Budget over 10 years, which could be used to ease the deficit and to fund education and health programs.

Shadow minister for families Jenny Macklin compared the Government’s current concern for pensioners with its past treatment of them.

She said the Coalition’s 2014 Budget removed $1 billion of pensioner concessions and ended the $900 seniors’ supplement to self-funded retirees receiving the Commonwealth Seniors Health Card.

The 2015 Budget reduced the pension to about 370,000 recipients, Ms Macklin said.

Mr Morrison wants to axe the Energy Supplement to two million Australians, including about 400,000 pensioners, cutting $14.10 a fortnight from a single age pension.