Fairfax’s Heath Aston has published an eye opening article today revealing how dividend imputation credits received by tax-free (mostly wealthy) superannuation holders over the age of 60 are costing the Budget some $6 billion a year in forgone revenue:
The true extent of the damage to tax receipts by a system which allows tax-free earnings for those over 60 is revealed in research by the Parliamentary Budget Office.
It found that the refund of franking credits on share dividends – which has resulted in people with millions of dollars in self-managed super receiving cash cheques from the Australian Taxation Office at the end of the year – are a net negative on tax receipts…
Superannuation assets are expected to grow from $1.9 trillion to $6 trillion by 2030, meaning the cash leaking out of the budget due to dividend imputation will also rise dramatically unless addressed.
And the blame for this Budget blow-out can once again be traced back to the Howard Government:
In 2007, then Prime Minister John Howard removed the need for people in the so-called “pension phase” – those over 60 – to pay 15 per cent on super fund earnings. This followed a decision in 2000 to allow people to claim “excess” franking credits back from the ATO.
Chalk this one up as yet another example of the long-term Budget sabotage by the Howard Government, which on top of its looser means testing of the Aged Pension and dumping of the superannuation contributions surcharge on higher income earners, has enabled wealthier older Australians to make out like bandits at the expense of younger taxpayers.
