The Coalition’s new assistant treasurer, Stuart Robert, attacked the Labor Party’s proposal to abolish excess franking credits in a scathing address at the Alliance for a Fairer Retirement System (AFRS) in Sydney on Tuesday.
Robert used the event to assert that the policy was “just nuts” and constituted an attack on middle- and lower-income earners, in front of an audience of self-managed superannuation fund pensioners and super fund industry stakeholders.
“The Labor Party thinks it’s going after the top end of self-managed super funds,” said Robert, who was elevated to his position on August 28. “May I suggest that the Labor Party has got no idea how self-managed super funds work?”
Robert quoted figures from Treasury showing that 96 per cent of individuals affected by Labor’s “retiree tax” – as he repeatedly called it – have taxable income of less than $87,000.
“So much for the big end of town,” he said. No Labor MPs were represented at the event.
Robert reminded the crowd that when Labor announced the policy, shadow treasurer Chris Bowen announced that it was “well targeted” and “well designed”.
“It is a terrible indictment of our political opponent’s sense of well-targeted policy,” Robert said.
He noted that 900,000 people would face losing franking credits, with the “critical point” being that 45 per cent of those were 65 and over.
“Any changes overwhelmingly disadvantage not just the elderly but the middle and lower class,” Robert said.
‘A big pot of money’
Labor’s plan to eradicate excess franking credits has come under fire from not only the Liberal Party, but also several high-profile financial industry associations and leaders in the private wealth sphere.
Bowen announced the plan in March with the title “A Fairer Tax System – Ending Cash Refunds for Excess Imputation”. It has since endured a barrage of criticism.
John Maroney, chief executive of the Self-Managed Superannuation Fund Association and chair of Tuesday’s AFRS meeting, posted a media release on Monday stating that the policy is “flawed, inequitable and fails to meet the policy intent of improving the integrity of dividend imputation for all taxpayers”.
Wilson Asset Management chairman Geoff Wilson spoke after the assistant treasurer at the meeting and said the policy, if enacted, would “have a dramatic implication for equity markets and result in the first recession in Australia for 27 years”.
A crowd member asked Wilson what he thought the drivers for the Labor Party were. It needed “a big pot of money to give away”, he responded.
The gravy train
Not everyone shares the view that the policy would harm the self-managed superannuation fund sector and the national economy. The day after it was announced, Forager Funds Management senior analyst Gareth Brown said the change would be “fairer”, even if “many of us on the gravy train” didn’t agree.
“Even if the fairness argument doesn’t appeal, maybe self-preservation will,” Brown wrote on the Forager blog. “Scrapping dividend imputation refunds seems preferable to scrapping imputation entirely. And that’s what they’re calling for in some quarters.”
Also, in a recent Professional Planner article, SMSF specialist Max Newnham argued the franking credit plan could actually add a new generation of SMSF members, contradicting popular concerns that members would wind up self-directed funds en masse.
“While increased administration and complexity often work against having children join an SMSF,” Newnham wrote, “it could make a great deal of sense for an SMSF with two parents in pension phase to have up to two of their children who are in accumulation phase join the fund.”