8 May 2018
Joe Kelly & Simon Benson
Bill Shorten has been caught out “exaggerating” the impact of his dividend imputation crackdown on the wealthy after new costings reveal fewer than five super funds in Australia claimed $2.5 million in excess franking credits in 2014-15.
The Opposition Leader has repeatedly justified his decision to scrap the refunding of excess franking credits — a move that will raise about $55 billion over 10 years — by saying the existing system allows some wealthy people to claim cash refunds of $2.5m while paying no income tax.
But according to fresh costings from the Parliamentary Budget Office requested by Liberal Democratic senator David Leyonhjelm, “less than five” self-managed super funds claimed more than $2.5m in refundable franking credits in 2014-15. The PBO conceded there could be just a single self-managed super fund in the country with the investment portfolio to cash in $2.5m in dividend tax credits, but was unable to publish the exact number due to “confidentiality reasons”.
The $2.5m figure used repeatedly by Mr Shorten was treated with open scepticism by key economists and leading super industry figures including Michael Rice, the chief executive of actuarial consultancy Rice Warner, as well as SMSF Association chairwoman Deborah Ralston.
The new PBO costings found the average excess franking credits claimed by the top percentile of fund balances was $83,000.
“These figures show that Labor was exaggerating the effect of its policy on wealthy individuals and underestimating its impact on middle and low-income individuals,” Senator Leyonhjelm said.
“It’s bad policy in principle but it’s also bad policy in practice, as these numbers show.’’
The Labor policy is one of several major revenue-raising measures estimated to haul more than $210bn into government coffers over the next decade if Mr Shorten can implement his agenda in the event he wins the next election.
Senator Leyonhjelm said his PBO costings appeared to indicate that those who benefited from the refunding of excess franking credits were not rich. The PBO figures show that, of the 201,439 self-managed super funds that claimed excess franking credits, only 33,761 had a balance of more than $2.4m. By contrast, more than 45,000 self-managed super funds claiming excess franking credits had a balance under $403,000.
“The notion that this is hitting the rich or the big end of town — there’s not that many of them,” Senator Leyonhjelm said. “The bulk of the load of this policy would land on people who don’t have a lot of money.”
However, the costings also appeared to support Labor’s arguments that 50 per cent of the benefit of refundable franking credits accrued to the top 10 per cent of SMSF balances, with about $1.36bn in tax credits claimed by the 33,761 biggest funds.
Labor has also rejected arguments that taxable income is a suitable benchmark to measure the wealth of individuals captured by its overhaul. It has instead pointed out that a couple with a $3.2 million superannuation balance with a family home and $200,000 in shares outside super could still draw a $130,000 income each year and pay no tax.
The PBO costings show that a little more than 400,000 people who claim excess franking credits pay a taxable income of less than $9500 while 16,300 have a taxable income of more than $109,600.
Labor initially said the shake-up would raise $59bn over a decade and $11.4bn over the forward estimates, but later excluded 320,000 people who received an Australian government pension or allowance through its “Pensioner Guarantee”.
The opposition said the guarantee would reduce forecast revenue over the decade from $59bn to $55.7bn, and $11.4bn to $10.7bn over the forward estimates.
The PBO costings bear out the Labor forecasts over the forward estimates.