Labor leader Bill Shorten has proposed abolishing refundable excess dividend imputation credits in a move that has galvanised the financial services industry in opposition.
Yesterday, Mr Shorten announced that under a Labor government, individuals are no longer able to claim cash refunds on excess imputation credits that had not been applied to offset tax liabilities.
The opposition leader said the abolition of the benefit – which was introduced by the Howard government following the Keating government’s establishment of the dividend imputation system in 1987 – would result in an additional $5.6 billion to the federal budget bottom line and reduce “unfair revenue leakage” that allegedly disadvantages voters in lower income brackets.
Lobby groups representing the financial services sector were quick to shoot down the proposal as reducing the quality and confidence of Australia’s retirement system.
“Constant tinkering with the settings ultimately undermines confidence in the superannuation system, at a time when we want to encourage more people to be self-funded in retirement,” said ASFA chief executive Martin Fahy.
“The system already has a $1.6 million cap in the retirement phase and our analysis show[s] recent reforms to superannuation and the retirement funding system are working with time needed for these changes to be bedded down.”
FSC chief executive Sally Loane similarly rejected the proposal, saying the current policies governing superannuation is advantageous to Australian investors and retirees.
“The purpose of superannuation is to fund a comfortable retirement for Australians while reducing their reliance on the age pension,” she said.
“Super policy is working, it has been gradually reducing national taxpayer expenditure on the age pension, but this mooted change could put the brakes on that.”
With self-managed super fund trustees a key demographic set to be impacted by the proposal if implemented, the SMSF Association (SMSFA) joined the chorus of financial system participants opposing the measure.
Speaking to InvestorDaily sister title Nest Egg, SMSFA chief executive John Maroney said the proposal “unfairly targets” a sector of the super system that has worked towards being self-sufficient in retirement.
Of the mainstream superannuation industry representative groups, only Industry Super Australia (ISA) – whose members maintain close links to the labour movement – has come out in support of the proposal.
ISA chief David Whiteley described the move as sensible and called on the federal government to support the Opposition proposal.
“It has been evident for several years that policy changes are needed to modernise the super system,” Mr Whiteley said.
“There is a need to make the system fairer and by reducing reliance on the aged pension, more economically sustainable.”
ISA’s calls, however, will likely fall on deaf ears, considering a series of Tweets from federal treasurer Scott Morrison accused Mr Shorten of being a $59-billion “slug on more than 1 million pensioners”.
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