TREASURER:
Imagine if the tax refund you get at the end of your tax year was going to be taken from you; the Government was going to take that back. The tax that you've overpaid, the Government gives back to you at the end of the year in your tax refund and the Government said "No, no, we're going to take that, we're going to nick that, we’re going to trouser that”. That’s what the Labor Party has said they are going to do to pensioners, retirees and people on low incomes today.
Let's understand what their proposal is: their proposal is to take away from them what the Government would normally give back to them because it's tax that has been overpaid. If the Labor Party are prepared to double tax, to make you pay twice the tax that you should, if the Labor Party are prepared to deny you what is effectively a tax refund because you've overpaid your tax, where will they stop? This is a Labor Party that is so addicted to higher taxes they're completely off the leash. They have thrown away the rule book. They will call anything inequity now in the name of just jacking up taxes. This latest measure will mean if a Labor Party is elected, the higher tax bill on the Australian economy will now be more than $200 billion over the next 10 years. At its peak, it will be more than $50 billion a year more in the tax burden on the Australian economy than would happen under a Coalition Government. Why? Because we have a speed limit on taxes. We impose a speed limit on taxes of 23.9 per cent of the share of the economy, because we know that you should keep the burden of tax on the economy as low as possible. You should set your taxes at a level that the economy can sustain and then you should set your expenditure to live within those means. That is what we mean when we say live within our means. We say that you should keep your spending under control, which we have done. We have the lowest rate of spending growth of any Government in the last 50 years. That’s why we can say we are keeping taxes low because we've got our expenditure under control. The Labor Party have lost control of spending. The left wing of the Labor Party is letting it rip and that means they will let taxes rip. But this in particular today is a brutal and cruel blow for retirees, for pensioners, even by the Labor Party's own admission, they are admitting that pensioners will be hit by stealing the tax refund of retirees and pensioners and low income earners. That's what they are doing today. They can dress it up anyway they choose, but that is the brutal reality of what the Labor Party have decided to do today. There are no holds barred from the Labor Party anymore. Everything you earn is up for grabs from them. They have no restraint on themselves. They will go for it wherever they think they can get away with it. We have to call them out on this. This is a brutal tax grab from a Labor Party so addicted to tax they just don't know where they're going anymore. They can't control themselves.
This is obviously not something the Government would support. It violates terribly the simple principle that if you've paid tax on something, you shouldn't have to pay it twice. The government should give that tax back to you if it has already had tax paid on it. I think that’s a fairly sensible principle. They're not dealing with loopholes here. What they're doing is creating them. Let's think about this for a second. If you're a pensioner and you've got a decision to say "I've got a bit of extra money, do I put it in the bank and earn interest at between 2-3 per cent or do I buy a share in that same bank and after tax have an earning of between 7-8 per cent?" At a time when peoples' earnings are not where we'd like them to be, why you would penalise a self-funded retiree, a pensioner or anyone, from actually saying - no I think it is a sensible thing to invest in something where they can get a 7-8 per cent return than put it into a bank and get 2-3 per cent. This is a cruel slug, it is a cynical slug. It is something that the Liberal and National parties would never support.
QUESTION:
The argument for making this change is that the cash refund didn't exist before 2001. In 2001 there were very big surpluses to fund this kind of cash refund. Those don't exist anymore. Isn't it fair and reasonable to rethink it in those circumstances?
TREASURER:
No, because what the Howard Government did was fix the policy weakness of the Keating Government. Think about this: look at the distribution of these - what I call tax refunds. That's what they are, tax refunds, just like the tax refund you get at the end of every year if you've overpaid tax which millions of Australians understand because they get those refunds. If they took away your refund, I know exactly how you would feel and that's how pensioners and retirees and low income earners who benefit from this very reasonable position would be feeling today. Take an industry superannuation fund. They don't claim a lot of these benefits because they have the ability to wash that and set against other parts of tax that they have paid on other assets. If you have your money in an industry fund, as opposed to a self-managed superannuation fund, you will be able to use all the tax credits in the industry fund but you won't if you're in a self-managed super fund and you're relying on shares. This was dealing with an inequity in the original system. If tax has been paid on something, which it has, that benefit should be the same to everyone, whether they sit in an industry fund, a self-managed super fund, whether they are a pensioner or a person paying 19 per cent income tax or lower - none for that matter who are eligible to get the refundable tax credit on these issues. No, Peter Costello fixed the problem in Paul Keating's system and what Labor wants to do is break it again.
QUESTION:
Treasurer, your own white paper backed this reform…
TREASURER:
No, that is not true. That’s actually not true.
QUESTION:
Explain how that is not true... (Inaudible)
TREASURER:
It didn't recommend that and the Government has never entertained it.
QUESTION:
Is it true that Treasury was considering something similar to this?
TREASRUER:
No.
QUESTION:
What about the fairness of it, if you have the top 1 per cent of self-managed super funds averaging a cash back payment of $83,000?
TREASURER:
You are missing the point. A pensioner buying shares in the Commonwealth Bank will be hit by this tax slug. That is not fair. This is not about fairness. This is about a brutal tax grab by the Labor Party who cannot control their spending. Why is it that Labor have walked away from putting the speed limit on taxes as a share of the economy? Just after we were elected in 2013, many of you would have been there, Chris Bowen was down at the Press Club and said `tax as a share of the economy cannot rise above 23.7 per cent share of GDP’ but yet he went to the last election and he had taxes as a share of the economy rising to 25.7 per cent of GDP. Labor have lost control of themselves on taxes and what today's announcement shows is there's nothing they won't touch. There is nowhere they won't go. Under Labor, taxes will be higher. They will always be higher because Labor cannot control their spending.
QUESTION:
Treasurer, the measure was to cost originally $500 million a year. It is in the order of $5 billion. Why is that? Why has there been this massive blow out. Is it because it has become this tax lurk for some people?
TREASURER:
Well, explain to me how it’s a tax loop?
QUESTION:
No, I’m asking you…
TREASURER:
No, you said it was a tax loop, so explain to me.
QUESTION:
I’m asking the question, Treasurer…
TREASURER:
You’re making an assertion.
QUESTION:
Why did something blow out $500 million to tenfold to $5 billion?
TREASURER:
That was the costing done in 2000. It’s 2018 now, it’s been almost 20 years of changes in the economy – a few things have happened over that period of time, but the principle is no different. The principle is the same. What was done back then was to ensure that if tax has been paid on something, it shouldn’t be paid on it twice, that was a system failure, a design failure of the original system. It was making people pay tax twice. It was making pensioners pay tax twice. It was making retirees pay tax twice. What does the Labor Party want pensioners to do? Go out and buy Bitcoin? We’re going to have to put Bitcoin tellers in every Coles supermarket to make sure they can get their cash out because that’s currently we’re they’re going to have to go invest their money now.
QUESTION:
Treasurer, you emphasised the impact on pensioners but isn’t there truth to this policy that it’s substantial impact is not only on self-managed super funds but it’s on the wealthier of self-managed super funds…
TREASURER:
Let me unpack that a bit. So you’ll recall the changes that we made a couple of years ago for balances of greater than $1.6 million and that they now pay 15 per cent tax on those earnings. Because the Labor Party haven’t revealed their costings, so I’d be interested to know where the Labor Party have actually factored that in to what their expected revenue is from this measure given that now that balance of funds above $1.6 million is now attracting tax at 15 per cent and whether that’s been offset in their costings – I’d be interested to know that. I’d also be interested to know this, has the Labor Party factored in the cost of this based on a 25 per cent tax – for businesses of less than $50 million or a 30 per cent tax? If it’s a 30 per cent, then I’ve got the answer to the question that I’ve been asking for a long time – and many of you have – will Labor reverse the small to medium sized business tax cuts? So they’re just two simple questions for Bill Shorten to explain today, I’d be surprised if he knew the answer but he should know the answer because he plans to spend all the money he thinks he’s going to raise off the back of this. We all know their experience on the mining tax, we all know how they go with these things – the Labor Party – but the point today is simply this: Labor wants to steal your tax refund. That’s what this is. It’s a tax refund for tax that has already been paid. That’s fair. It’s fair that the Government doesn’t keep tax that you’ve overpaid. It’s fair that we give that back – absolutely fair that we give that back. It’s unfair to steal someone’s tax refund, I wouldn’t do it on your tax refund as a normal income taxpayer, I’m not going to do it for pensioners and retirees who are simply making smart decisions in an environment like this where they can get a better return on buying shares – whether it’s in a bank or a mining company or many other listed companies that have issued these types of dividends. What do you want them to do? Go and live on two per cent and put it in a bank? That’s what they’re forcing them to do and I don’t think that’s smart, I don’t think they’ve thought this through. It’s a brutal tax grab.
QUESTION:
How many pensioners will be hit by this?
TREASURER:
That is seen in the policy today, that type of distribution analysis wouldn’t have been done yet but if you’re telling me there’s not one pensioner in the country that doesn’t own a bank share, well, find them for me.
QUESTION:
One of Labor’s arguments is that self-managed super funds, some of them getting $2.5 million in cash rebates, is a consequence of chasing this concessionality …
TREASURER:
It’s not a concession …
QUESTION:
That that impacts their investment decisions, that in essence they are making investment decisions in order to maximise their position?
TREASURER:
That’s an argument against dividend imputation and they’re not getting rid of dividend imputation, if they were doing that they’d be getting rid of dividend imputation full stop and that would be saying to superannuation funds as a whole that they wouldn’t access imputation to offset their tax position in those funds – but they’re not doing that. They’re targeting over a million Australians and saying to those million Australians that, “Yes, you have paid tax twice on this and we’re going to keep it.” And that’s not fair, that’s not good tax design, it’s theft and you always wonder why – when people commit these sorts of crimes against people, you’ve got to ask the question why and the reason why Labor wants to go and steal this money back from Australians is because they cannot control what they spend and that’s why they keep jacking taxes up. More than $200 billion in higher taxes will fall on the Australian people if Labor is elected at the next election – think about that – $200 billion. It is a staggering figure, maxing at more than $50 billion a year so if the Coalition is re-elected, that means $200 billion less of a tax burden on the Australian economy over the next ten years.
QUESTION:
Treasurer, I might be wrong on this, but isn’t one of the concepts of the tax refund system as it stands – if this were correct – is that the Government actually winds up giving a tax refund to some people who don’t pay tax? You actually wind up giving tax back to people who aren’t paying tax.
TREASURER:
It’s a tax refund because people have their assessed tax, okay? You’ve got your marginal tax rate, now if you were earning less than $18,200, you would have a zero tax rate and for many older Australians – pensioners and others – that’s exactly where they sit and they also have the benefits of the seniors tax offset as well. So what you’re saying to them is that companies pay tax on it and you as a low income earner, when you receive that money you now have to pay tax on it – and that’s not right. It’s their tax refund, it’s a tax refund for tax that has already been paid and if we allow a system that says no, we are going to take back and keep taxes where they’ve been paid twice, well, what do we say? That just shows a Labor Party that just has an insatiable appetite for higher taxes. Their only attitude towards the Budget is high taxes. That’s all they ever talk about when it comes to managing the Budget: “Keep spending. Let the spending rip uncontrollably. Oppose the Government when we seek to get spending under control because you can always just keep jacking up taxes.” That’s the Labor Party’s view. Bill Shorten has made something really crystal clear today to the Australian public. If you want higher taxes, vote Labor. If you want lower taxes, vote Liberal and National. Thanks.