Treasurer Josh Frydenberg and professional investor Geoff Wilson have joined forces to campaign through to the federal election to warn against the financial hit to investors from Labor’s tax increases on shares and other assets.
Mr Frydenberg and the Wilson Asset Management founder held talks in Sydney on Friday to discuss Labor’s plans to eliminate most cash refunds for excess franking credits and to stop negative gearing for future investments in existing properties, shares and other assets.
The Treasurer said the pair discussed the “devastating impact that Labor’s abolition of negative gearing, doubling of capital gains tax [halving of the capital gains tax discount] and removal of refundable franking credits will have on the value of Australians’ savings and investments”.
“Labor’s policies present a significant risk to equity markets and the cost of capital for Australian companies,” Mr Frydenberg said.
Mr Bowen said on Friday: “Mr Wilson can vote for, donate to and campaign for whomever he wishes. But he shouldn’t dress up this political campaign as some sort of altruistic effort.
“It’s quite clear Mr Wilson and the Liberal Party are working closely together in a co-ordinated campaign against Labor.
“Labor has been bold and decisive in targeting tax concessions that overwhelmingly benefit the wealthy – in negative gearing, trusts, excess imputation credits and tax affairs – and we make no apologies for taking the tough decisions to rebuild Australia’s fiscal buffers.”
While franking credits will remain under Labor, it wants to stop cash refunds for excess franking credits for investors, typically self-funded superannuation funds, who pay little or zero tax. Pensioners are exempt after Labor watered the policy down in reaction to a backlash. Labor argues cash refunds are fiscally unsustainable and its policy will raise an estimated $55.7 billion in tax revenue over a decade.
Mr Wilson, who manages $3 billion for clients, said he had gathered 25,000 signatures for his petition against Labor’s dividend imputation changes. He said Labor’s tax proposals would damage investors and that he and the Treasurer had agreed to keep up the pressure.
“When you start playing around with franking there is going to be major ramifications,” Mr Wilson said.
“Negative gearing allows ordinary Australians to create wealth for a better future.
Labor has rubbished a petition being circulated by Mr Wilson protesting plans to scrap cash payments for excess franking credits, after 10 Opposition MPs, including policy architect and shadow treasurer Chris Bowen, received emails from Mr Wilson thanking them for signing it.
Mr Wilson said it was clear a Labor supporter signed up the MPs as sabotage, as they all came from the same IP address at the same time.
Economist Saul Eslake said Labor’s franking policy would reverse a “dumb” tax break for people paying little or zero tax.
“People will have to rearrange their financial affairs, but should they ever have had this tax break in the first place?”
Labor treasurer Paul Keating first introduced dividend imputation in 1987 to stop double taxation of corporate profits, via franking credits streamed to shareholders. Prime Minister John Howard expanded its generosity in 2000, to allow full refundability of corporate tax to shareholders who pay no tax.
Mr Wilson said he still wanted to meet Mr Bowen, but the shadow treasurer had not taken up his offer.