Labor is signalling it will cushion pensioners from the impact of its policy to end cash rebates for excess imputation credits, as new analysis from an independent economic thinktank blasts the Turnbull government for over-egging its political attack on the proposal.
The shadow treasurer, Chris Bowen, said on Tuesday that Labor was fully committed to the policy unveiled last week but added that the opposition was “always looking at ways to help pensioners”.
The policy, which abolishes franking credit cash rebates for retiree investors, affects about 200,000 pensioners and part pensioners as well as wealthier retirees with low taxable income because they are drawing tax-free income from their super funds and other assets.
While Labor held the Melbourne electorate of Batman with a positive swing at the byelection last weekend, swings against the ALP were recorded in the northern suburbs of the electorate, such as Reservoir, which have a higher proportion of pensioners than other areas within the boundaries.
Labor also performed better on pre-poll votes than it did on byelection day itself. While those differences are not definitive, they could suggest the policy, unveiled last Tuesday and immediately attacked by seniors’ groups and the self-managed super fund industry, shifted some votes in Batman.
Labor is also facing the prospect of more byelections in marginal seats as a consequence of last year’s dual citizenship imbroglio.
The high court is currently considering the eligibility of the ACT senator Katy Gallagher to sit in parliament. If the ruling goes against her, it could possibly put more seats in play.
The policy delivers Labor $11.4bn over the next two financial years and $59bn over 10 years – money Labor needs to fund income tax cuts and social spending in the lead-up to an election due next year.
New analysis from the Grattan Institute points out that the Turnbull government is using “deeply misleading” claims in political attack lines against the proposal.
Brendan Coates and Danielle Wood from the Grattan Institute argue in an analysis published by Inside Story that some low-income retirees could be negatively affected by the proposal but the bulk of the impact will be felt by wealthier seniors.
The authors argue that while 14,000 maximum-rate pensioners and 200,000 part-pensioners will be hit, the vast bulk of the revenue will come from wealthier retirees.
They also take issue with some of the claims produced by the government since Labor unveiled the measure last week. “The government claims that 54% of people affected by Labor’s policy – some 610,000 individuals – have taxable incomes of less than $18,200,” Coates and Wood say.
“And it says that 86% of the value of all franking credits refunded are received by those with taxable incomes of less than $87,000 a year. These claims are deeply misleading. Taxable income ignores the largest source of income for many wealthier retirees: tax-free superannuation.”
The views from Grattan line up with arguments from the respected independent economist Saul Eslake who told Guardian Australia last week the government’s critique was “misleading in the same way that most of what [the treasurer] Scott Morrison said about Labor’s policy on negative gearing was misleading”.
