The ALP’s proposed removal of refunds for dividend imputation credits has been widely criticised for its potentially devastating impact on low-income retirees.
Under the plan announced by Opposition Leader Bill Shorten on Tuesday, imputation credits would no longer be refundable. He has since promised a Labor Government would compensate up to 250,000 pensioners for every dollar they would lose.
Mr Shorten said wealthy retirees with Self-Managed Super Funds (SMSFs) would be most affected by the change.
National Seniors has crunched some numbers for those who would be most adversely affected.
For example, one retiree uses her refund to pay her car registration each year, as it coincides with her car rego renewal. She is on the full pension (single person $23,250pa including supplements) and has about $40,000 in shares that her husband left her when he died that pay about $2000 in dividends, including the refund of franking credits. Her total income is about $25,325pa.
If the proposed ALP measure were to be introduced in its original form, she would lose approximately $600 a year. It may not sound like a lot, but it would amount to just under 2.5 per cent of her total income. That is enormous for a single person on a fixed pension struggling to making ends meet.
Many retirees on low and fixed incomes rely on dividends to supplement their income.
Do you think the ALP plan is an ill-considered imposition on the retirement incomes of those who can least afford it? Is it better not to axe their tax credit refunds in the first place, rather than compensate them later?