Labor wants to scrap a policy which means some who pay no tax get $2.5 million refund
from the ABC online...
Australia's $5 billion-a-year system of cash refunds for some shareholders would be abolished under Federal Labor's latest tax policy. Key points:
A Howard-era policy means some shareholders not paying any tax can convert franking credits into a cash refund from the ATO
The parliamentary Budget Office found some self-managed superannuation funds got returns of up to $2.5 million, according to the ALP
The new system would start in 2019
When paying dividends to domestic shareholders, companies include what are known as franking credits.
These credits ensure company profits are not double-taxed, and can be used to reduce the tax bill of an individual or superannuation fund.
But after a change in 2000, shareholders not paying any tax can then convert credits into a cash refund from the Australian Tax Office.
"John Howard and Peter Costello made it unsustainable by introducing tax refunds," Shadow Treasurer Chris Bowen said.
"We can't afford this any longer, the budget's under pressure, and difficult decisions are necessary to ensure the budget returns to surplus."
Mr Bowen said the cost of the Howard-era policy had exploded and now exceeded the Commonwealth's annual spending on public schools. Benefits flow to self-managed superannuation funds
According to the Opposition, more than nine out of ten taxpayers would be unaffected by its change.
Much of the benefit of the refunds flows to self-managed superannuation funds (SMSF).
People with SMSFs in the retirement phase of super — where the earnings might not be taxed at all — often receive the refund.
"Some people have engineered their affairs so they can get maximised refunds," Mr Bowen said.
"It is an anomaly in the tax system — most tax concessions aren't refundable — this is one which stands out and one which is due for reform."
"We are the only fully-refundable imputation system in the world." ALP won't release costing
The Opposition said its policy had been costed by the independent Parliamentary Budget Office (PBO).
The ALP would not release the costing, but said the PBO found:
The policy would save $11.4 billion in 2020-21 and 2021-22
The plan would affect about 200,000 SMSFs
Some SMSFs received cash refunds of up to $2.5 million in 2014-15
Of credits refunded to SMSFs in 2014-15, half the benefits went to the top 10 per cent of funds (which all had balances exceeding $2.4 million)
Labor said charities and not-for-profit institutions, including universities, would be excluded from the change.
Labor Leader Bill Shorten will announce the policy today during a speech in Sydney, and will emphasise that those affected would not pay any additional tax.
The new system would start in July 2019.
