Labor line on dividend tax to hurt retirees
LETTER TO THE EDITOR
Federal Opposition Leader Bill Shorten in the lead-up to the 2019 Federal Election has promised to reverse the policy put in place by his forebears, which will see increased taxation on retirement earnings.
In 1987 Bob Hawke and Paul Keating changed the tax laws to make sure earnings on shares were only taxed once.
This is a fundamental principle upheld in many countries across the world. In the past the company earned money, it paid tax and a dividend was paid to the shareholder, who then paid tax on that income. Company income was thus taxed twice.
The dividend imputation and franking credits came into existence to enable the tax already paid to be allocated properly so the tax would, in effect, only be paid once on those earnings.
In 1992 under the Keating Labor government, it became compulsory for employers to pay superannuation for their employees’ retirement benefit, due to the forecast massive change in demographics as Australians lived longer.
The sum of funds in superannuation now stands at about $2.6 trillion, with 23.4 per cent of that held in Australian shares.
Many self-managed funds and managed funds are holders of those Australian shares. Most working or retired Australians are members of funds that are the recipients of dividend imputation and franking credits, and many Australians rely significantly on those income streams from their superannuation fund and the associated franking rebates to survive in retirement. If they are not already recipients, then their retirement savings plans are predicated upon receiving those income streams.
It’s time to tell Mr Shorten and his Labor Party mates to keep their hands off the retirement savings income streams of average Australians.
Those income sources have formed part of retirement planning initiatives since dividend imputation and franking rebates were established.