by Perry Williams

Labor’s proposal to cut billions of cash refunds for ­excess franked dividends will be examined by a Coalition-dominated economics committee as the government looks to exploit the impact of the mooted policy on retirees before next year’s federal election.

Labor plans to abolish the ­rebate component of the ­imputation credits system that benefits shareholders and self-managed super funds by allowing them to cash in unused imputation credits.

Bill Shorten expects to claw back almost $60 billion over 10 years by abolishing the refunds, which are based on the difference between the corporate tax rate and the marginal tax rates of retirees, who can pay no tax.

A House of Representatives’ economics committee chaired by Liberal MP Tim Wilson said it would focus on the impact on retirees of removing the refundable franking credits.

Under the terms of reference, the inquiry will examine who ­receives the franking credits, how they would be affected, implications the change might have on pension dependence and how older people may be forced to adjust their investment strategy.

“There has been legitimate community concern about proposals to remove cash refunds for their full allocation of credits for individuals and superannuation funds, and that it amounts to a tax on the savings of retirees,” the Victorian MP said.

“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.”

The 10-member committee is dominated by six Liberal Party MPs. Three Labor MPs and one Greens MP make up the balance. Submissions are due by Nov­ember 2.

Opposition Treasury spokesman Chris Bowen accused his Liberal counterpart, Josh Frydenberg, of taking the “unprecedented step of making a ministerial reference to a parliamentary committee solely ­focused on opposition policy”.

Mr Bowen said the Coalition should instead focus its policy ­response on low wages growth in the economy.

“You’d think the government would have more work to do on tax policy, given the Liberal Party’s one-point economic plan lies in tatters for now,” Mr Bowen said.

Wilson Asset Management, which manages a portfolio of listed investment companies that have more than $3 billion invested mainly in Australian shares on behalf of 80,000 investors, said it wanted the policy scrapped.

“It’s effectively appalling what Labor has proposed where people have worked all their lives and saved under a certain structure and then they’re moving the goalposts,” Wilson chairman Geoff Wilson AO said.

He drew a comparison between the royal commission into the banks and the impact Labor’s policy would have on retirees.

“We will be equally shocked and amazed at the stories that will come out from the impact this will have on retired Australians,” Mr Wilson said. “There are 90-year-old people that survive on this money all of a sudden having 30 per cent cut.”

Self Managed Super Fund Association chairwoman Deborah Ralston said Labor’s policy would have a negative impact on self-funded retirees and would hurt poorer Australians who, in many cases, relied on the cash ­refunds.

“It gives a chance to put the facts on the table,” Ms Ralston said. “It’s a disproportionate ­effect on those lower-income people. What we know is there will be a behavioural response from people who have significant savings who will move away from holding Australian shares, but for many who are less aware it will be a significant impost.”

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