Labor vows to block off tax loophole
LABOR will announce a Robin Hood tax plan today in a bid to save $11 billion from the Federal Budget, by closing a tax loophole being used mostly by wealthy retirees and superannuation funds.
The election commitment continues Opposition Leader Bill Shorten’s class warfare pitch, targeting tax breaks for the rich and big companies.
Come tax time, shareholders would be able to claim their dividends as a write-off, to reduce the tax they pay.
But some at the top end of town are going further and using it as a way to claim a tax refund and take home more cash, courtesy of taxpayers.
Mr Shorten today will announce a plan to cap the loophole, allowing mum and dad investors to still be able to claim dividends to lower their tax, but people will no longer be able to use it to claim a tax refund.
“Every dollar allocated to tidy little arrangements for people who already have millions of dollars is a dollar that can’t be used to repair the Budget,” he said.
“This change affects a very small number of shareholders who currently have no tax liability and use their imputation credits to receive a cash refund.
“These people will no longer receive a cash refund, but they will not be paying any additional tax.”
Mr Shorten said Parliamentary Budget Office modelling showed the move would save $11 billion over four years and $59 billion over 10 years.
About 92 per cent of Australian taxpayers do not receive cash refunds from this system, known as dividend imputation, using it only to reduce their tax.
Labor says people who receive the cash refunds are, typically, wealthier retirees who don’t pay pay-as-you-go tax.
The Keating government introduced the scheme but did not allow cash refunds to be claimed. The Howard government allowed the refunds when the Budget was in surplus. It cost $550 million a year.
Dividend imputation stops company profits being taxed twice – first, when the business pays and second, when profits are paid out as dividends.