by Phillip Coorey and John Kehoe
Plans by Labor to axe cash payments for excess franking dividends will be scrutinised by the House of Representatives’ Standing Committee on Economics as part a push by the Coalition to extract political mileage from the policy in the run-up to the next election.
The Coalition-dominated committee, led by Victorian Liberal Tim Wilson, will inquire into all aspects of what the government has labelled Labor’s retiree tax including who and how many would be affected, whether it would lead to increased dependence on the aged pension and how investment behaviour and patterns would change.
In March, Labor promised that if elected, it would scrap cash payments for excess franking credits. After an initial backlash, it said all pensioners, full and part as well as pensioners who were current recipients from a self-managed superannuation fund, would be exempt. All other retirees and other investors, would not be exempt.
The policy is still forecast to raise $10.7 billion in its first two years, and $55.7 billion over a decade.
“The committee is examining what impacts the removal of refundable franking credits would have, particularly on retirees who have made long-term retirement saving decisions based on their ability to claim refunds on their franking credits and whether it will compromise their financial security,” Mr Wilson said.
It will also scrutinise the sustainability of the revenue forecasts. Labor is banking on the revenue to build its $200 billion war chest from which it will fund promises to spend more on essential services and also pay down debt and deficit faster than the government.
Privately, the government believes it has not sufficiently exploited the issue which has caused great anger among those affected.
Submissions to the inquiry will be open until November 2 with hearings to extend well into the new year. The federal election is due by May 18 at the latest.
In Parliament Wednesday, Prime Minister Scott Morrison accused Labor of wanting to fleece retirees. He said the biggest impact would be on women.
“Thirty per cent more women will be impacted by the Labor Party’s retiree tax sucking $5 billion out of the pockets of hard-working Australian families, and at that time when women are on their own, when their partners may have been deceased and passed on,” he said.
Shadow treasurer Chris Bowen accused the government of abusing the use of the committee.
Wilson Asset Management chairman Geoff Wilson, who oversees more than $3 billion in shareholder capital on behalf of almost 80,000 retail investors, said the inquiry was positive because Labor was “moving the goal posts” for retirees.
“The proposed change fundamentally disadvantages older Australians who have worked all their life under a certain system,” he said.
Sign the petition to stop the retirement tax.