Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: First though the Finance Minister Mathias Cormann joins me. Thanks very much for your time Minister. The Labor party and Bill Shorten will today make the point that Australia is the only OECD country with a fully refundable dividend imputation credits system. Why would we be the only one? It makes sense.
MATHIAS CORMANN: Because we have introduced, with bipartisan support at the time, a very good policy principle and that is it is good policy to avoid double taxation. Bill Shorten today wants to reintroduce double taxation. Every Australian today knows that if Bill Shorten got to be Prime Minister next year, everyone of them will be targeted with higher taxes. No Australian will be safe from a higher tax agenda of Bill Shorten. Whether you are a worker, a home owner, a saver, an investor, a small business, a professional, Bill Shorten will come after you to pay more tax.
KIERAN GILBERT: Is this a loophole though to benefit the wealthy, where people cannot just minimise their tax bill but get refunds from the ATO.
MATHIAS CORMANN: This is nothing of the sort. It is not a loophole at all. It is a deliberate design feature which as I said was introduced with bipartisan support. In fact, when it was introduced, the Labor party bragged that the policy was their policy in the lead up to the previous election, indeed, that it was a logical extension of the reforms introduced by Paul Keating in the early 1990s. Under Bill Shorten the Labor party has completely lost the plot. They are now pursuing more than $200 billion in higher taxes, increasing the overall tax burden on the economy. There is no question that his policy agenda would damage the economy, it would damage growth, it would lead to fewer jobs and lower wages. This particular proposal would hit more than a million retirees, many of them pensioners. This is all about making sure that a pensioner, a low income earner, or somebody who does not have to pay tax on their income because they are in a very low or in a zero per cent income tax category that they do not pay more tax on the earnings that they receive as part owners of a company than they would pay if it was their wages.
KIERAN GILBERT: But if it is only just pensioners and low income earners how does this climb to a cost of $8 billion a year within the next few years. It sounds like a lot more than just pensioners.
MATHIAS CORMANN: I did not say a few pensioners. I said a million retirees, including many pensioners. But on top of that, many Australians have worked hard, have saved hard, have saved in their superannuation because that is what governments of both political persuasions have encouraged them to do. Now Bill Shorten is coming in and he is saying I want a share of your retirement savings. I want to take a chunk out of your retirement savings in order to pay for my reckless spending. That is what he is doing.
KIERAN GILBERT: He is actually going to argue it today that a small number of people will no longer receive a cash refund but they will not be paying any additional tax. That is his argument.
MATHIAS CORMANN: They will pay additional tax. Do not be misled by his shifty rhetoric. As part owners, shareholders are part owners of companies, the company on their behalf have paid more tax than they needed to pay. That is why they get a tax refund.
KIERAN GILBERT: So for example a pensioner who has two thousand Telstra shares, Telstra has paid the tax at whatever it is, thirty per cent rate, they are meant to get that tax component on their dividends back, they don’t get it back, therefore they are being charged that thirty per cent rate on those earnings.
MATHIAS CORMANN: A pensioner who directly owns shares and is paid a dividend, which with the profits taxed at thirty per cent in the hands of the company, is able to get a tax refund in relation to the tax that is the excess tax that has been paid on their behalf when their personal taxable income tax rate was much lower or indeed zero.
KIERAN GILBERT: In terms of the approach here from the Government, do you believe that this is now effectively a distortion in the system where some people are going to be double taxed on the same dividends where others aren’t?
MATHIAS CORMANN: It will create a distortion in the market. There is no question. That is another issue in relation to all of this. Bill Shorten by increasing the tax burden on self-funded retirees and pensioners and others in relation to share investments creates an incentive for people to invest more into other asset classes like property. It will quite possibly have distortionary effects across the economy because he is creating this disincentive for people to continue to invest in shares.
KIERAN GILBERT: Just finally, Mr Shorten reiterates his support of imputation credits to reduce tax but not to claim cash refunds. So he supports it to the point where a refund would be forthcoming.
MATHIAS CORMANN: Bill Shorten is typically shifty. By doing what he is doing he actually sets out to target pensioners and self-funded retirees who directly own shares or self-funded retirees who own shares through their self-managed superannuation fund. That is precisely what he is doing. Every pensioner who directly owns shares, any self-funded retiree who directly owns shares or who owns shares through their self-managed super fund would end up paying more tax under Bill Shorten’s high taxing agenda.
KIERAN GILBERT: Minister appreciate your time. Thanks very much for that.