Bill Shorten is going after self-managed super funds in a new plan to abolish a Howard-era tax loophole that allows investors to claim tax imputations from dividends.
The Opposition leader will announce on Tuesday his plan wind back the policy if he wins the next election, arguing the money saved will be used to bring the budget back to surplus.
The imputations scheme was introduced under Paul Keating to make sure company profits weren’t taxed twice – once with corporate tax, and again with personal income tax.
According to Nine News, John Howard changed the scheme in 2000 to allow primarily high-wealth shareholders and self-managed super funds to get a cash refund from the government if their tax imputation was more than the tax they owed.
Self-managed super funds currently gain the most from the scheme, with some funds getting more than $2.5 million in tax refunds every year.
“If nothing is done, this subsidy alone will cost the budget $8 billion every single year,” Mr Shorten will say in his speech at the Chifley Institute at the KPMG offices in Sydney.
“Reforming the system to eliminate this concession will save the budget $11.4 billion over the final two years of the current forward estimates, and $59 billion over the medium term.”
The Australian reports the change will target about 200,000 of the country’s 600,000 self-managed super funds and a small percentage of wealthy investors, but will not apply to 92 per cent of Aussie taxpayers.
“Every dollar that slips through these loopholes is a dollar that cannot be invested in the Australian people and their potential,” The Australian reports Shorten will say in the speech.
“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 and bring Australia back to surplus.
“Firstly, this change only 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. Let me repeat that: a small number of people will no longer receive a cash refund — but they will not be paying any additional tax.”
Federal treasurer Scott Morrison has called the proposal a $59 billion insult to pensioners, retirees and low-income earners.
“Labor’s announcement today confirms Bill Shorten will now hit Australians with more than $200 billion in higher taxes if they are elected,” he said in a tweet on Tuesday.
“Labor’s latest tax hike is a $59 billion slug on more than 1 million pensioners, retirees and low income earners who will get taxed twice by Labor on what they earn from investing their hard earned savings.”
The policy will apply from July next year if Labor is elected.