by Simon Benson.
Australia’s largest union-backed super fund had warned the Abbott government against making any changes to dividend imputation tax treatment, claiming any “modification” to the system would lead to a critical flight of capital from Australia to foreign investments.
The Morrison government has seized on the warning issued in 2015 in a submission from AustralianSuper to the Hockey tax review. While it predated Labor’s $55 billion plan to abolish franking credit refunds, it explicitly warned about making any change to the system. In its submission, AustralianSuper said it opposed any modification or removal of the system, warning that super funds would be forced to reallocate towards foreign investment.
The industry fund, however, has since backed Labor’s policy, claiming that the reforms to the imputation system would not affect members’ returns or the flow of capital.
In its submission to the tax white paper on May 29, 2015, AustralianSuper said: “AustralianSuper submits that there are substantial benefits to Australia in the continued operation of the present dividend imputation system. AustralianSuper strongly supports the dividend imputation system and opposes modification or removal of the system.
“AustralianSuper is therefore concerned that modification or removal of the imputation system could lead to significant amounts of capital in the superannuation system being reallocated towards foreign investment on the basis that such reallocation could provide comparative benefits to the retirement outcomes of Australian superannuation fund members.”
A spokesman for AustralianSuper yesterday said the 2015 submission was made in the context of the proposition of dividend imputation being abolished altogether.
“The submission in 2015 was made when the debate considered removing franking credits from the overall community and the economy rather than the current proposal, which is narrowly focused on non-taxpayers,” the spokesman said.
“We are strong supporters of dividend imputation. Having carefully considered the publicly available material about this proposed change, we are satisfied it won’t lead to significant adverse capital flows or negative impacts on members’ long-term balances.”
An exclusive Newspoll published by The Australian yesterday revealed widespread opposition to Labor’s policy still existed, despite an increase in those in favour of abolishing what Labor describes as a subsidy to wealthy retirees. Josh Frydenberg said Labor’s policy was at odds with previously held positions of the union-backed industry funds.
“By saying that he’s ‘not for turning’ on Labor’s retirees tax, Bill Shorten is arrogantly turning his back on the more than one million Australians who will have their savings raided by the Labor Party,” the Treasurer said.
“Labor’s policy is designed to hit those who have taken personal responsibility for their own retirement and it will have many consequences, including pushing people on to the pension and driving them to invest in foreign equities over Australian shares.
“This is why so many groups have come out against the policy, including National Seniors and the Australian Shareholders Association, and is at odds with the clear warning from AustralianSuper in their previous submissions to government on tax policy, in which they say, AustralianSuper ‘opposes modification’ of ‘the present dividend imputation system’.
“After telling Australians that if they don’t like it, they can vote against Labor, Chris Bowen’s position will become untenable if Labor seeks to crab-walk away from their retirees tax in the face of public opposition.”