The truth about ending cash refunds for imputation credits

Unfortunately, since its announcement, there has been much misinformation about Labor’s policy to end cash refunds for imputation credits. This policy will only affect people who receive cash tax refunds i.e. taxpayer funds after they have paid no income tax in that financial year.

It is important to note that under Labor’s proposed policy:-
• No one will pay a single cent more tax;
• No one will lose a single cent from their superannuation contributions;
• No one will lose a single cent from their pension;
• No one will lose a single cent from their share dividends;
• It is not retrospective – it will only apply from 1 July 2019; and
• Everyone who gets share dividends can still use the system to reduce their tax bill but they won’t be able to get a tax refund if they have paid no income tax.

Imputation credits were implemented by the Hawke Government in 1987. The purpose was to stop tax being paid twice on company profits: once by the company and again by the shareholder on the dividends. Labor continues to support this policy and it won’t change.

The problem emerged when the Howard Government changed the rules to allow shareholders who paid no tax to get a cash refund from imputation credits. This has caused a fiscal time bomb that we can no longer afford. Within the next few years, it will be costing $8 billion a year – more than we spend on public schools or child care, and three times what we spend on the Australian Federal Police.

This is an unaffordable tax concession that 92 per cent of Australians do not use.

Overwhelmingly the benefits of this concession go to wealthy Australians that are using self-managed superannuation funds. Half of the cash refunds go to self-managed superannuation funds with balances of more than $2.4 million. Some funds are paying no tax and collecting a $2.5 million cheque from the tax office each year.

I understand that there will be a small number of people who are affected by this policy that do not fit into the categories mentioned above. The policy has been put forward well in advance of an election so that people can understand the impact on their individual circumstances and will have time to adjust their investments to negate any change. Labor will always look after pensioners and, no doubt, Bill Shorten and Chris Bowen will have more to say about that down the track.

If you are a Moreton resident and would like to talk to me about this policy please call my office on (07) 3344 2622 and I will return your call as soon as I can.


Graham_Perrett 2Graham Perrett – Federal Member for Moreton

 

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