Frustrated retirees have strong concerns over Labor’s proposal to scrap cash refunds for some shareholders. (Julian May: photoxpress.com)
Labor’s plan to abolish cash refunds for some shareholders has reopened the debate about how much government support retirees deserve.
The ALP announced on Tuesday that if a person is not eligible to pay any tax then they should no longer be able to convert excess credits into a cash refund from the tax office.
That inspired frustrated retirees to contact the ABC about their concerns over the policy, which would kick in from July next year if Labor wins the next election.
Some were annoyed about what they saw as yet another switch in the rules about their savings, because they had already been affected by changes brought in last year by the Coalition.
And they were bitter about the prospect of losing thousands of dollars a year if Labor’s policy is implemented.
Those who emailed the ABC described the tax rebate cheque they received as representing presents for the grandchildren or “the occasional eye fillet”.
There is political danger for Labor in that sort of anger — shadow treasurer Chris Bowen has revealed that 200,000 pensioners would be affected by the change in varying degrees.
But it is also an opportunity, with the expectation the policy will save $5 billion a year which can instead be channelled into income tax cuts.
Video: Chris Bowen says that 200,000 pensioners would be affected by the change in varying degrees.
Pensioners and retirees quickly become political weapons during these debates.
“They are battling,” Malcolm Turnbull declared on Wednesday of the pensioners and self-funded retirees most likely to be affected by the Labor plan.
But battling is in the eye of the beholder.
Many of those in these circumstances are choosing to rely on the earnings they receive, including the cash payments that Labor wants to scrap, rather than gradually drawing down on their savings.
Mr Bowen pointed out that superannuation amounts of up to $1.6 million are tax-free, so people can appear to have low taxable income and might even be called “battlers”.
But they can hold significant amounts in their superannuation.
Video: Labor’s new policy would take around $6 billion a year in tax credits away from self-managed superannuation fund retirees.
“So for example, people in the top 1 per cent of self-managed super funds are getting $83,000 in refunds, that is more than the average wage and that is not sustainable,” Mr Bowen told 7.30.
The Government calls it double taxation, but Mr Bowen draws the line at someone using the credits to reduce their tax liability to zero.
“We are not going to give you a refund when you have not paid tax,” Mr Bowen said.
Former Liberal leader John Hewson agrees with the Labor plan, arguing there are better uses of government money than helping people who have hundreds of thousands of dollars in shares or the bank.
But he said he was surprised it was not being “grandfathered” to exempt people who have set up their investments under the current rules or give them more time to restructure.
Labor’s Jenny Macklin argues the Government cannot claim to be pure when it comes to pensioners, arguing it has made plenty of attempts at adjusting the aged pension and the rules that apply to it, including lifting the pension eligibility age to 70 and scrapping the energy supplement of $365 a year.
Economist Chris Richardson has long argued that those policies, as well as Labor’s latest plan, are all necessary to wind back the overly generous tax breaks for seniors introduced under the Howard years.
Video: Scott Morrison says the policy to abolish cash refunds for some shareholders amounts to double taxing.