TONY WILSON is a former lawyer who manages his own self-funded superannuation scheme. In this week’s THINKING ALLOWED he gets stuck into Labor’s plans to slug people like him with an additional tax.
AS a self-funded retiree likely to be affected by Bill and B(ow)ens franking credit imputation proposed changes, I have read numerous letters to the editor of The West Australian, The Australian and occasionally the Australian Financial Review as well as what I assume is informed editorial and expert commentary to understand their operation and effect.
I have concluded that the changes are unfair and discriminatory to a large number of those older voters who will be affected.
The whole area of superannuation and taxation is clearly unfair to younger people, still working, as outlined by Adam Creighton in The Australian (page 12, February 12, 2018) but he notes: “Making franking credits refundable at least has the whiff of tax purity about it, taking Labor’s 1987 tax reforms to their logical conclusion.”
Franking credit imputation places the onus for taxation liability on dividend income (after a company has paid tax on its income) by retaining and paying the imputed tax (at, say, 30 cents in the dollar) to the Australian Taxation Office.
Self-funded retirees relying on dividends as supplementary income (in addition to superannuation funds in pension mode and other income-producing assets) can apply for a refund of the franking credit imputatiaon where their income in total is below the level at which liability to pay tax commences.
The Labor proposal will deny the refund of those credits to up to one million Australians with taxable income of less than $37,000, according to Treasury modelling.
Self-managed super funds with share assets may also be affected.
Industry super funds (Labor mates) will not be affected; some claim this is a ploy to encourage SMSF owners to move their assets in industry super funds.
An important pillar of the rule of law is that any exceptions to a law are fair and non-discriminatory.
Bowen’s recent petulant outburst that anyone who opposed the changes could vote against Labor is an unconscious blooper admitting the discriminatory impact; ie, it creates inequality.
Another pillar of the rule of law is that laws should be applied without exception.
There are valid exceptions to this such as necessity.
But here there are many exceptions; recipients of aged pensions who registered by March 28, 2018, trade unions, charities and not-for-profits whose share assets include franking credits.
Bowen should look to Sally McManus’s recent publication On Fairness (MUP, 2019) for a lesson in principled behaviour.
On page 80 she writes: “You don’t fix unfairness with more unfairness; you don’t get a fair go by denying one to someone else.”
Ponder that in the context of Labor’s class welfare mentality.
Her comment comes in a pamphlet following a narrow rhetorical thread about the right to break unjust laws, seeking historical support for workers’ rights in this regard by claiming Mandela, Ghandi and Martin Luther King Jr as unionists.
That’s a long bow.
Martin Luther King Jr’s Letter from Birmingham Jail was republished last year (Penguin Random House). It was written in jail in 1963 on the margins of a newspaper after he’d been arrested for non-violent resistance to segregation regulations in Alabama.
He wrote in response to a letter from eight white ministers who criticised his activities as “unwise and untimely” as an “outsider” when negotiation was the appropriate tool.
In his reply he writes cogently and compellingly about the difference between just and unjust laws (pages 8-12): “One who breaks an unjust law must do so openly, lovingly and with a willingness to accept the penalty.”
Tell that to the unions.
What to do about the franking credit proposals?
There’s already evidence of forces being marshalled against them.
One suggestion is to use your Senate vote to place Labor last, increasing the probability it won’t have the numbers to get the proposal legislated.
Local members fo the House of Representatives in all states and territories will be receiving furious lobbying demanding a rational explanation for the proposal.
As you see, I don’t think there is one.
But the pressure is having an effect. Kerryn Phelps is on record as saying she will not support it, no doubt because of what she is hearing in her electorate.
Post script: After I’d written this opinion, Bowen published his claim that Labor’s proposal “is fair” (The West Australian, February 15, 2019). But his reasons distil to two basic ones: He needs to find money to fund Labor’s election promises and those electors most affected are unlikely to vote for Labor. He’s somehow doing the electorate a favour by “telling the truth before the election”.
The facts and the debate about franking credits is much more complex than Bowen suggests. See three letters published in The Australian Financial Review on Tuesday, February 19).
He’s been called incompetent and his proposals immoral.
We deserve proper details and honesty about this issue.