Shadow Treasurer Chris Bowen responds on franking policy

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The Federal Opposition Labor Party intends denying franking cash credit refunds except for welfare pensioners. This subject has become one of the most heated debates on our website. Although it relies both on Labor winning the next election and then passing the legislation, the most recent Newspoll for two-party preferred voting has Labor ahead of the Coalition by 52-48. However, PM Malcolm Turnbull remains well in front of Bill Shorten as the ‘better PM’.

A reader of Cuffelinks forwarded this email exchange with Shadow Treasurer, Chris Bowen. The reader’s identity has been removed because it reveals personal details.

Email to Chris Bowen, 21 May 2018

Dear Sir,

I have sent a letter and email previously expressing my outrage at the proposal but have never had any reply, so third time lucky.

My query is;

My understanding is that the only people who will be able to claim the cash refunds of franking credits will be those who were already in receipt of a Centrelink full or part pension on the day of the announcement.

I also understand that anyone not qualifying as a Centrelink pensioner on that date will, even if in future years they do qualify for a Centrlink pension, never be able to claim the cash refunds.

My wife and I have a SMSF which is our only source of income and we are both in the pension drawdown phase of that fund.

The combined balance of the fund is around $920,000, 80% of which is invested in shares and last year generated $14,000 of franking credit cash refunds.

We have a Commonwealth Seniors Health Card and a Pensioner concession card and receive the Seniors supplement.

The prospect of losing so much income is stressing me beyond belief so any clarification would be gratefully appreciated.

The policy was apparently aimed at the 1% of SMSF’s who have been, based on out of date 2014 figures, claiming up to $80000 of cash refunds. We hardly fit into that category and anyhow these really rich people will, under your proposal, still be able to claim refunds as since 2017 they are now paying 15% tax on fund balances over $3 million.

Once again the middle class battlers get screwed.

Thank you for reading this and I await your answer to my question.

Reply from Chris Bowen, 5 June 2018

Dear XXXX,

Thank you for your email.

Labor’s reforms to excess dividend imputation credits will remove a fiscally unsustainable tax arrangement that is seeing billions of dollars in lost revenue, making it harder for the government to fund important services and return to surplus.

Dividend imputation worked perfectly well between 1987 and 2000 when cash refunds weren’t sent to people who didn’t pay income tax. Labor will return to that system. While I understand not everyone will like it, it is necessary and Labor is prepared to be honest about our plans in advance of an election and not surprise people afterwards.

Budgets are about priorities. And to get the budget back to surplus difficult decisions need to be made. And yes, making the public case to take something off someone can be difficult, but federal Labor believes that the policy case for reforming refundability and excess imputation credits is a strong one, that it’s absolutely the right thing to do.

We have said that we’ll consult with the Australian Taxation Office, Treasury and tax experts on the implementation of this policy. However, we have no plans to make changes to the announced policy.

Warm Regards,

Chris Bowen MP

Federal Member for McMahon

Email to Cuffelinks from the reader, 5 June 2018

Graham

Here is the reply I have just received from Bowen’s office.

He does not accept than the very wealthy whom the plan is supposedly targeting will not be affected but that the low level SMSF of middle class Australians will be.

They have no intention to alter the proposal which is incredibly discriminating against battlers. They appear proud of the fact that they will stuff up the retirement of 1000’s of retirees.

[Editing note: Although Chris Bowen did not correct the statement, our understanding is that Labor’s ‘Pensioner Guarantee’ will apply in future, exempting nearly all welfare pensioners from the policy. It is pensioners within SMSFs who have the 28 March 2018 deadline].

 

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70 Responses to Shadow Treasurer Chris Bowen responds on franking policy

  1. Wayne Trowbridge November 1, 2018 at 5:12 PM #

    Totally unfair to the 900.000 Australians who claim nothing against the countrys social sevices,in other words saving the country billions.This will also hit the younger generation,ie less to inherite,they vote as well .The country towns kept on the move by grey nomads will also suffer as the money won’t be there to spend .This will cost my wife and myself $1400.

  2. Chris M August 16, 2018 at 4:11 PM #

    I am the filthy rich person who started all this discussion with my emails to Bowen.

    My purpose was to clear up the confusion as to what happens to my franking credit cash refunds when I am able to claim a Commonwealth part pension – which will under Shortens policy will happen a lot sooner than before.

    I started contributing to my super at 20 yoa ie 50 years ago. I didn’t benefit from the super guarantee. I was not a federal public servant who can get 15% super guarantee- on top of a generous salary

    Most of my knockers totally miss the point.

    Lets assume 2 part pensioners in 2020. both with say $720,000 in a SMSF and with 75% in shares which could earn $10,000 – $14,000 in cash refunds of franking credits.

    one of these pensioners will, over a 10 year period, earn $140,000 more income then the other, over 20 years potentially $280000 more income – depending on how much is drawn down.

    why is one pensioner so much better off.

    Simply because he/she was a part pension when Shorten made his announcement in March 2018 and they will, forever, be able to grab the cash refunds

    The other pensioner was not a part pensioner and will be forever banned from accessing the cash refunds.

    HOW CAN THIS GROSS IMBALANCE BE JUSTIFEID AS FAIR AND REASONABLE AND EQUITABLE.

    Keep in mind all not for profit organizations can keep their cash refunds . this just happens to include union organizations.

    if the cash refunds are such a toxic blight on society then the ALP should ban them for everyone.

    this will never happen as Shorten knows it would be electoral suicide.

    So on with the class war.

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