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Shorten draws a line in the sand

Bill Shorten and the Labor party are beginning to demonstrate true grit. The latest policy announcement that will see an end to a welfare handout to the rich, otherwise known as the Dividend Imputation Scheme M2, is a masterstroke.

The dividend imputation scheme enables salary earners who own shares to minimise their tax liabilities with franking credits. However, where a person has a very low income those franking credits not only mean they pay no tax, but they result in non-taxpayers being owed money by the ATO.

Yes, it will hit some part-pensioners, perhaps as much as $4800 a year but, as they weren’t paying any tax, it was only acting as a supplement to their pension payment anyway. Its cancellation will result in them receiving a larger pension payment.

They will likely be no worse off, or minimally out of pocket. But for those who have large shareholdings and have used John Howard’s overly generous system to firstly, pay no tax, and then receive a cash handout each year from the ATO, effectively working the initiative in a way Paul Keating never intended, their days of sponging off the system are coming to an end.

This is just another example of the Howard era’s middle-class welfare that has reached its use-by date. We can place this in the same basket as capital gains tax breaks and negative gearing concessions that are wasted on the wealthy and which offer no benefit to our economy.

This May, Scott Morrison will deliver the last budget before the next federal election and it is not surprising he has been talking up the possibility of personal income tax cuts. So it wasn’t surprising then, when Bill Shorten made his announcement, that Morrison immediately began a scare campaign trying to frighten pensioners into thinking they will lose their imputation credits. They won’t.

They will only lose the amount over and above the point where they stop paying tax. And that will likely mean they receive a higher pension payment as compensation. As if to counter Morrison’s plan, Shorten has demonstrated that Labor can also offer tax cuts and he is showing us how they will pay for them.

And just so we get it straight, the amendment to Paul Keating’s original scheme was one of several measures introduced by Peter Costello in the early 2000s, that was introduced on the back of the mining boom and which was nothing more than a vote-buying exercise.

Shorten believes that the economy cannot afford such generous arrangements for the wealthy in much the same way Morrison believes we can no longer afford welfare for the unemployed, the sick and the less well off. It’s an interesting dichotomy. It’s neoliberalism versus left-wing ideology. We now have a clear distinction in policy approaches by the two major parties.

At a time when we have record high levels of private debt, record low interest rates, and mortgage stress tied to wage stagnation, the combination of which threatens to bring about an economic meltdown, highlighting the two starkly different approaches will make for a robust debate. It is one Shorten and his shadow treasurer, Chris Bowen are confident they can win.

We will probably get some indication of its acceptance or otherwise when the next opinion poll is published. However, putting some sense and sensibility back into the dividend imputation scheme is the right call.


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  1. Bronte ALLAN

    The only thing “wrong” with the Labor Parties proposal is that the bloody lying, inept so-called “liberal party” (i use term “liberal” under advisement!) will, as usual, turn anything the Labor lot propose on its head & ALL the stupid, flat earth voters will (naturally?) believe anything that comes out of Talkbull or his mates mouths, as the “truth”! After all, how could the Labor party come up with anything that is any “good”? WTF?? Another good article here Mr Kelly!

  2. Alpo

    Excellent initiative from Shorten and the ALP… They are clearly showing that their path is leading to Social Democracy…

    But the usual suspects in the MSM are already shouting hysterically that poor mums and dads will see their superannuation slashed by the “greedy” Shorten and his gang of Communists…. etc., etc., blah, blah…

    My bet is that whatever the stupid MSM say about this or anything else regarding Shorten and the ALP just won’t work…. Let’s see.

  3. David1

    Great piece John, you’re writing is always absorbing. Bill’s proposals must have put immediate fear and OMG into the various mindsets of the economic dunces within the Coalition, it only took a couple of hours for them to hit the media if that. Just their mates of course in Murdoch’s outlets.at first, who have no hesitation in backing up their lies and fear mongering.

  4. John Lord

    You mirror my thoughts for tomorrow.

  5. Aortic

    All these poor poor pensioners having to sacrifice the Dom for Krug or Moët! Oh the humanity.

  6. New England Cocky

    Now let us see the re-introduction of the ALP Housing policy that grandfathers CGT and limits negative gearing to only new presidential premises to expand the available pool of housing. Then we need the re-introduction of the ALP FTTP high speed Internet linking decentralised communities away from the present megatropolis’ with decentralised government jobs supporting local economic booms in this e new and now growing urban regional communities. One government job supports about 3.5 private sector jobs in an urban regional community.

  7. Rossleigh

    Has anyone pointed out to all those poor pensioners who are having their income cut by Shorten’s plan that – if the Liberals get their way on company tax – then their franking credits will be cut by 5%… Or cut in half, if we reduce company tax to 15% like some of them have suggested?

  8. totaram

    Rossleigh: That is far too complex for the MSM opinionistas to absorb, or perhaps they do absorb it, but it doesn’t fit the narrative plan handed down by the IPA. Take your pick.

  9. Rossleigh

    That may be true, totaram, but sooner or later somebody is going to point it out!

    Oh wait, I just did…

    Well, someone else will need to share it…

  10. Kaye Lee

    “Those who emailed the ABC described the tax rebate cheque they received as representing presents for the grandchildren or “the occasional eye fillet”.

    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.”


    That’s the bit that gets me. If you have millions invested, why not use some of it.

  11. John Kelly

    The more I read about the so-called outrage at this policy announcement, the more convinced I am of the differences that exist between the two parties. It was something that, for a brief time, seemed blurred.

  12. townsvilleblog

    John I agree that the ALP is at last heading in the right direction, all they would need to do now to gain my vote is condemn the Adani mine, and legislate a minimum percentage of taxation that multinationals had to pay on their billion dollar incomes and they would have my vote.

  13. Kyran

    The great explanation given by little Johnnie was that he didn’t like ‘taxing taxes’, which was one of the ‘arguments’ he used when establishing this scam.
    He used the same argument at the time of introducing the GST on fuel, which was subject to a fuel excise. As a result, the ‘indexation’ of fuel excise increases was abolished in 2001 as a trade off.
    Remember how Abbott tried to bring back the indexation in 2014?


    And then 2015. Eventually, Labor capitulated.


    What’s really funny is that the headlines screamed, prior to the introduction of the GST, about this tax on a tax. Little Johnnie was emphatic, to the extent that it was a ‘rolled gold’, ‘ridgy didge’ ‘core promise’ that indexation would be frozen, forever. By 2014, when Abbott reversed this decision, there was NO REFERENCE to the GST, as evidenced by the two links.
    Whilst the reintroduction of the fuel excise indexation is not a big figure in domestic budgets, it is indicative of how a government can change its tune and how a willing media will ignore previous undertakings. It should also be noted that GST and the fuel excise effects most pensioners whilst those getting a cash benefit on substantial investments effects comparatively few pensioners.
    If Shorten wanted to get adventurous, why doesn’t he advocate a different tax free threshold for pensioners? Income tax removes money from the ‘market’ but there is an incentive to apply a different standard to the elderly in the community as our government wants to keep them in their own homes as long as possible. That was the reason for all the fanfare about the program that was meant to be in effect last year.


    Bearing in mind this mob couldn’t organise a drink in a brewery, the inevitable delays and shelving occurred.


    If you make the tax free threshold for all pensioners substantial, say $80k, wouldn’t you be taking the ‘class warfare’ argument out of the equation?
    Thank you Mr Kelly and commenters. Take care

  14. Pete

    You can guarantee the MSM will have a field day with this, and like the previous 2 elections, will have all the stupid people believing it. I have already seen articles allegedly quoting people who will be screwed by this policy, which I suspect are just fake news concocted by the Lieberals and MSM. Like the lifelong Labor supporting ex teacher living in (very very expensive) Rozelle in Sydney whose entire income is derived from share dividends who will now be ruined and broke and voting Lieberal.

  15. Ria young

    There already is a higher tax threshold for the aged than there is for workers. Also, any payments from super are tax free after age 60. Franking credits were introduced to stop double taxation, as the dividends were regarded as taxable income in the hands of the recipients, but as so much income is now not taxed, franking credits should not apply. Companies declare dividends from after tax profits, giving franking credits to people not even paying tax is therefore reducing the amount of paid tax flowing from businesses, and the people most benifitting from that are the large shareholder of shares paying dividends with 100% franking credits. I for one do not have shares worth that mich money. I will lose a bit on the few AMP shares I have, but so what.

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