Earlier this month, the Labor party announced the contentious proposal under the guise of targeting the wealthy and creative accounting.
However, the plan has largely come unstuck in professional tax communities, and is expected to have a significantly broader impact than just wealthy Australians, including on pensioners and the often modest wealth of self-funded retirees.
The federal government weighed in today to speculation that Labor will be reining in its policy by granting exemptions to pensioners.
“It’s extraordinary to think that Bill Shorten announced this policy and said it was a hit on millionaires. Then he needed to concede that there were 1.1 million Australians who would be directly impacted by Labor’s tax grab. These people included self-funded retirees, pensioners, part-pensioners and war-windows,” said Minister for Revenue and Financial Services, Kelly O’Dwyer.
“The Labor Party said they would not make one change to their policy, and only today we are hearing that they in fact might make a change,” Ms O’Dwyer said.
“The people who would bear the brunt of Labor’s changes would be those people who could least afford it. We are talking around about 1 million Australians who have got a taxable income of less than $37,000,” she added.
The SMSF community has been particularly vocal in its distaste for the policy, with associations like the Self-managed Independent Superannuation Funds of Australia saying early on that it “failed the test of fairness” by capturing those on lower incomes.
Others, like Tactical Super’s Deanne Firth, labelled the policy an “attack on SMSFs,” given that it would impact a third of all SMSFs if implemented.
“While it is being touted as a loophole enjoyed by the wealthy, this proposal hurts self-funded retirees in SMSFs the most – retail super funds still qualify to offset their tax using imputation credits as their net tax position is positive – not due to a member by member allocation but because pooled overall, they have a positive tax position. So, the policy is a tax on the use of a particular structure, an SMSF,” Ms Firth said.