Even wealthy shareholders should help pay for essential services

| March 16, 2018

Labor’s policy on tax refunds for shareholders, released on 13 March 2018, is a stark reminder that policies addressing the huge gaps in Australia’s revenue base are necessary.

The governments’ continued provision of essential health, aged care, NDIS and other services is shaky as long as large gaps in Australia’s revenue base remain.

One of the gaps is the excessively generous tax breaks for wealthy retirees. Their super funds are not taxed on their income, including share dividends. Instead, in many cases, the Tax Office pays them thousands of dollars a year in tax credits on their share investments. Only 16% of people aged 64 years and over pay income tax, and many who don’t are actually very well off.

This is not sustainable.

We have a choice. We close gaps like these in the tax system, or we charge people more for services like aged care and home care.

In the debate over winners and losers from Labor’s policy, some of the so-called ‘’evidence’’ will be misleading. We need proper data on who is affected.

Although we’re confident the proposal will mainly affect people with substantial private wealth and, among retirees, those in the top 20 per cent by total income, we need to see a breakdown of the total income and wealth of those affected – both direct investors and those investing through super – and not just their taxable income which is often zero due to over-generous retirement tax-breaks.

But all of this is a distraction. We are increasingly concerned that we are entering into a pre-election  tax cut bidding war, when our priority should be to make sure we have the revenue we need to deliver essential services, including for older people.

This is not the time for personal tax cuts, company tax cuts, or more tax breaks for investment. We need to be certain the budget has moved into surplus before tax cuts are delivered. We need to prepare for all the expenditure challenges governments will face into the future.

We need to get the budget back on a firmer footing by making sure everyone is paying their fair share for essential services. That includes reducing over-generous tax breaks for super and shares, strengthening the Medicare Levy, and closing tax shelters in capital gains tax, negative gearing and trusts.

The parties need to focus on how to pay the future costs of health, aged care and the NDIS while meeting urgent needs such as affordable housing, public infrastructure, and reducing the worst poverty by increasing Newstart.

The census data showing a disturbing increase to 116,000 people who are homeless in Australia is a stark reminder of who is really doing it tough and the priorities that should be set by any government committed to tackling poverty and inequality.