La­bor line on div­i­dend tax to hurt re­tirees


Kalgoorlie Miner - - NEWS/OPINION - John Has­sell, Na­tion­als can­di­date for O’Con­nor

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.

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