DAVID SPEERS:
Treasurer, thanks for your time this afternoon. What have you been able to establish this afternoon?
TREASURER:
Labor just simply don’t get how this works. The only reason you actually get a refundable tax credit is if you have a low rate of marginal tax – if you have a marginal rate of 37 cents or 32.5 cents, you’d actually have to pay a top-up once you get your franking credit. Now, what this means is 97 per cent of people who actually get these credits have an income of $87,000 or less and when you do it by value, it’s 85 per cent. Now, that actually shouldn’t be surprising because the people who get access to these credits are people who have low rates of tax and that will obviously include people who are on low incomes. Let me give you an example, you and I will go out and buy some Commbank shares maybe this afternoon – whether that’s a good investment at the moment, well that’s for other analysts with the appropriate qualifications to advise your viewers – now, you and I because of the tax, I assume, we both pay will be able to fully access the value of the franking credits that would come from the Commonwealth Bank because we earn a higher incomes and we pay higher marginal rates of tax, in fact we would pay a top up. Now, if our pensioner relatives went out and bought the same Commonwealth Bank shares, what they would get is a refundable tax credit because they would either be paying no tax or a very little amount of tax. So, how is it fair that you and I get the full value of the franking credit but my pensioner relative does not? It’s just totally unfair.
SPEERS:
Just back on the statistics you referenced there, 97 per cent – the bulk of people on incomes below $87,000 – in retirement, when you’ve got a big investment presumably, an income of $87,000 – not a bad income, is it?
TREASURER:
You tell that to someone who’s living on retirement, $87,000. No…
SPEERS:
If their investment is earning $87,000…
TREASURER:
If they’ve got an income of $87,000 or less – well, let’s just remember they’re earning that off on the savings they’ve put away over their entire lives. So they’ve already worked very hard to get to that point and we did make the fairness changes a couple of years ago to ensure that those on really big balances, on balances above $1.6 million, that they would be paying 15 per cent tax on those earnings but if you’ve got a balance of less than $1.6 million, then no, you don’t pay tax on those.
SPEERS:
It’s only been in existence since 2001 when John Howard brought it in?
TREASURER:
Well, it passed in 1999 and guess who voted for it?
SPEERS:
Labor voted for it?
TREASURER:
Labor voted and you know why they voted for it? When they stood in the Parliament and said, “You know why we need to do this and support the Government doing this? Because it supports people on low incomes.” So, honestly, to have them come out today and say this is some sort of equity measure, it’s just another excuse for Labor to jack up taxes – we’re at $220 billion now, by the way, that’s where we’re up to over ten years.
SPEERS:
But do you accept that before 2001 when it came into effect, plenty of people did just fine, they lived on retirement incomes just fine?
TREASURER:
It was an error that had to be fixed. Let’s think about who actually has bought these shares. When the GIO was privatised, when the Commonwealth Bank was privatised, when Telstra was privatised, when Qantas was privatised, they were bought by mums and dads. They’re getting franking credits from those investments and for those on low incomes, they get a refund when their tax rate is set at a level which means they didn’t get the full value of those credits, and it goes back to that fundamental fairness point – why should you and I get the full value of a franking credit and a part pensioner does not? And that’s what Chris Bowen and Bill Shorten are saying today. They’re calling that part pensioner, a part pensioner, they are saying that they are some wealthy, over-the-top person – they’ve described this as a loophole.
SPEERS:
But a lot of them aren’t part pensioners. A lot of them – as Labor points out – 50 per cent of the value of this is going to the top ten per cent of self-managed super fund holders – is that right?
TREASURER:
What you have is more than half the number of individuals receiving a franking credit, they have a taxable income of below the tax-free threshold. You’ve got two-thirds…
SPEERS:
A lot of that is a spouse of a very wealthy…
TREASURER:
No, it hasn’t been. Has Labor provided those figures?
SPEERS:
Well, I’m just saying often a retiree earning an income up to $87,000 may be married to someone who is well above that threshold. The shareholding goes into the spouse’s name for this very reason.
TREASURER:
People live as a couple in retirement and they’re both living off the savings that they’ve generated over a lifetime. But, David, I cannot get past this fundamental principle of fairness. Labor has said this is about fairness. It cannot be fair that someone who’s on a low income cannot be given the full value of the franking dividend that someone on a higher income can. It’s actually no different to what they’re doing on negative gearing because remember what they’re saying is if you and I as a wage earner go out there and buy an investment property – an existing property – then we won’t be able to use negative gearing under the Labor Party but if a bloke who lives somewhere else and they have massive investment incomes, well, they can offset that against their investment income. They could own lots of investment properties and negative gear the other one so it just shows that Labor doesn’t understand that everyday people buy Commonwealth Bank shares or Telstra shares…
SPEERS:
But does it worry you though this will give them a war chest to offer tax cuts at the next election?
TREASURER:
What worries me is that they’ve reached such a level of arrogance about expecting to win the next election that they think they can get away with anything now – $220 billion worth of extra taxes on the Australian economy? That’s a lot that Labor thinks it can get away with and they’re just putting it all out there before the election, if they think they’ve got it wrapped up and they can just whack it out there and they spend all the money and say, “There we go.”
SPEERS:
But they could use some of this to lower other taxes – personal income taxes on low and middle income earners?
TREASURER:
Labor has not cut one tax.
SPEERS:
That’s what they’ve promised at the election.
TREASURER:
You can’t give them credit for something they haven’t even proposed to do, David.
SPEERS:
Does it worry you though, at all?
TREASURER:
No, we are the party that will be lowering taxes. We’re the party who’ve already lowered taxes. The Labor Party at the moment have unfunded promises because they’re saying that they can spend the tax cuts that they’re going to reverse for small business twice. They’re already $25 billion in the hole right now if they choose not to reverse the small and medium sized business tax cuts. Now, they keep talking about a $65 billion reversal on that. That means that if you’re a small business right now, if the Labor Party is elected, your tax is going up. If you will invest in an investment property, your tax is going up. If you are contributing more to your superannuation, you’ll be paying more tax. If you are earning off Commonwealth Bank shares, you will be paying more tax. This is how you get to $220 billion in extra taxes under Labor.
SPEERS:
Treasurer Scott Morrison, we’ll have to leave it there. Thank you very much for joining us this afternoon.
TREASURER:
Thanks, David.