Labor to end 'millionaire welfare' by axing tax loophole

Labor to end 'millionaire welfare' by axing tax loophole

This system, which is known as " dividend imputation", is unusual - only four other countries in the world use it.

"Australia now pays out $8 billion of taxpayer money in tax refunds to people who don't pay any income tax", Shorten said.

Mr Shorten said one in 10 of Australia's 2.5 million pensioners would be affected by the change.

Bill Shorten has doubled down on his plan to abolish franking credit cash rebates for retiree investors, branding the status quo "millionaires' welfare" bankrolled by ordinary Australian taxpayers.

The prime minister labelled Labor's plan a "tax grab" that is "robbing pensioners". "Have a word to your parents and they'll tell you how they feel about it and their friends".

Shorten refuted claims that pensioners would be hit hard, telling the Nine Network's Today Show the plan was created to save money and most pensioners would not be affected.

Speaking to reporters in Brisbane, the Labor leader rejected calls to water down his policy proposal, or exempt pensioners, following a vigorous initial backlash from seniors groups, the self-managed superannuation fund industry and shareholders lobby groups. "That's the lie that the treasurer and the prime minister are perpetrating today and again they perpetrated it on negative gearing. Why is it that Malcolm Turnbull will fight for millionaire welfare but not the welfare of battlers?"

Labor will abolish these refunds - which cost $8 billion a year - if elected.

Labor's proposed tax plan is theft, treasurer Scott Morrison declared yesterday, adding that the government would strongly oppose the opposition's pledge to scrap a commonly-used tax concession introduced by the Howard government in 2000.

Labor on Tuesday pledged to axe cash refunds for excess imputation credits paid to individuals and superannuation funds if it wins the next federal election - reversing a policy John Howard put in place almost two decades ago.

Treasury analysis of Tax Office figures leaked to News Corp suggest that up to 5000 Australians collecting more than $180,000 a year in taxable income would lose $20,000 in refunds, while 610,000 people on less than $18,2000 a year would lose $800 a year in cash returns.

The government said 97% of people who get franking credit refunds have a taxable income below $87,000, and more than half of the beneficiaries have taxable incomes below the tax-free threshold.

"The fact is a lot of the income people receive in retirement is "tax free" because it comes out of retirement-phase super funds", the shadow treasurer said.

Bowen said it would affect 200,000 part pensioners, and around 14,000 full pensioners, and save the budget $5 billion a year.

Former prime minister Tony Abbott argued the Coalition had a "credibility gap" on superannuation, given the adverse changes his successor Mr Turnbull tried to introduce before the 2016 election.

"To stop a Shorten government there's got to be a more effective attack and the difficulty is. there is a bit of a credibility gap here, and this is what needs to be addressed".

Even though the wealth of older generations has increased in line with asset prices, noted Wood, Coates and Daley, the share of older Australians who pay income tax has almost halved (from 27 per cent to 16 per cent) in the past two decades.

Labor's policy has launched a debate over what constitutes a "low income" and "high income" retiree according to Australia's tax system.

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