The move was needed to counter a Government campaign depicting the pledge to abolish the refunds on dividend imputation as a heavy-handed swipe at retirees’ finances.
The partial retreat will encourage the Government to intensify its campaign against what Treasurer Scott Morrison called “Labor’s cruel retiree tax”, in part by charging that the changes will make the tax system more complicated and increase unequal treatment.
Meanwhile, the Government is having problems with its own tax policy and might not get the Senate numbers to pass its business reductions this week as it had hoped.
The tax cuts don’t need to be legislated for several months, but politically it was important for the Prime Minister to have them on track before the Budget in May.
This week is his last chance for that.
The Labor move against “tax loopholes” it says would cost $59 billion in revenue over 10 years and was announced in the week before the March 17 Batman by-election.
Its chief aim was the use of the scheme by the very wealthy with tax-free incomes through superannuation accounts to reap a cash bounty.
Opposition Leader Bill Shorten will today confirm Labor will redesigned the policy just two weeks after its initial release.
Mr Shorten will announce a Pensioner Guarantee for pensioners and people on allowances, saying they will be protected from the loss of cash refunds for excess dividend imputation credits when the policy commences in July 2019 – should Labor be elected to government.
There will be a cut-off provision for self-managed superannuation funds with at least one pensioner or allowance recipient.
That would have to be the situation as at March 28.
Labor believes this means that every pensioner will still be able to benefit from cash refunds.
“Labor has always protected pensioners – and we always will,” said Mr Shorten and Shadow Treasurer Chris Bowen in a statement.
“Labor’s reforms to excess dividend imputation credits will crack down on an unsustainable tax loophole that gives tax refunds to people who don’t pay income tax, while protecting pensioners and paying for better schools and hospitals.
“Today, Labor is introducing a new Pensioner Guarantee – protecting pensioners from changes to excess dividend imputation credits. The Pensioner Guarantee will protect pensioners who may otherwise be affected by this important reform.”
In Question Time yesterday Treasurer Morrison outlined the difficulty Labor faced, with battlers at risk of losing $5000 a year in cash, a big chunk of their household budgets. Further, under Labor those on small incomes paying no tax would be denied the benefit, but those on big incomes would continue to benefit.
“You can be earning $500,000 a year, and you can get the full value of your franked dividends,” Mr Morrison said.
“But if you are earning less than $18,000 a year, if you are earning less than $37,000 a year, there is no tax refund for you….under the Opposition’s plan, because he is getting his hands in your pockets.”
But Labor has its own tax counter-attack, accusing the Government of convenient concern for pensioners.
The Opposition will point out the Coalition has cut the pension for 277,000 retirees; kicked another 92,300 retirees off the pension altogether; cut pension concessions that help pensioners with costs including rates and registration, and is trying to cut the $365-a-year energy supplement for 400,000 pensioners.