A new lobby group, the Alliance for a Fairer Retirement System, will fight Labor’s proposals to tax retirees.

A Shorten government raid on retiree’s superannuation will hurt of millions of Australians

Des Houghton, The Courier-Mail July 6, 2018

Retired business owner and cabinet maker Arthur Smith upset about Labor retirees proposed tax rip-off. Photo: AAP/John Gass

HARDWORKING Arthur Smith retired this week a bitter man.

The 71-year-old cabinet maker walked away from his small kitchen- manufacturing plant at Geebung on Brisbane’s northside fearing for his financial future.

He wonders whether all his hard work was worth it.

Smith is not alone.

A proposed Shorten government raid on retiree’s superannuation and pension funds has placed the financial security of millions of Australians over 50 in doubt.

Smith says under Labor’s plan, he would lose one-third of his retirement income derived from dividends and franking credits.

And he is no high roller. Smith’s business turns over $3.5 million. He employs 19 people. Most have been with him for more than 15 years.

“We always ploughed back profits to improve the business and along the way paid the 30 per cent company tax rate,” he says.

It was not an easy path, with Smith working “horrendous hours” in the early years to keep the firm alive.

“I’m old school. We never had a cent of debt,” says Smith, a maths and economics teacher before a career change saw him become a farmer, a financial planner and, later, a kitchen builder.“We decided 20 years ago that we wanted to provide for our own retirement and not depend on the pension.

“Alternatively, we could have blown everything we earned and lived very well, with the aim of ultimately living on the pension.”

Smith and his wife Aileen simply didn’t want to be a burden on anyone.

This was the thinking of Paul Keating when he radically changed the superannuation rules. He believed that Australians, where possible, should be self-sufficient in their retirement.

Shorten and his Shadow Treasurer Chris Bowen appear to have trashed that ideal. They seem to me to be more interested in promoting a grubby and divisive class war.

Says Smith: “We had 700 customers a year and it was a high-pressure job. We sell, manufacture and install.

“I’m very proud to say we never missed a job.”

Smith had hoped to pay himself a modest dividend in retirement.

Smith sees Labor’s plan as “an attempt to steal from us in order to fund a whole range of policies that we don’t necessarily agree with”. Above, Labor Leader Bill Shorten, right. Photo: Chris Kidd

“At present we have about $450,000 equity in the business, $150,000 of which is our shareholding,” he says.

“Ploughed back profits have contributed approximately $300,000 to the business’s working capital. This provides us with security, both for ourselves and our long-term and loyal employees.

“Over the last 20 years we contributed enough to our self-managed superannuation fund, and the fund was able to purchase the premises that the business operates out of.

“From the rent received and a bit of interest, the fund (which is in pension phase) earns about $70,000 ($35,000 each) annually, which is tax exempt.

“We must draw approximately $60,000 of this as income, given the value of the fund assets. We receive dividends of approximately $30,000 each from the company, and these are fully franked. To date the gross value of these dividends has been our taxable income and we have received a refund from the ATO for the excess tax we have paid.

“We would be very concerned should the Labor government change the rules, and simply take this refund away.

“You feel, what’s the use? Why try? I don’t think they understand the ramifications of what they are doing.”

Self-funded retirees and even some pensioners would have their tax refunds cut under a Labor plan to cap a credit system for shareholders and superannuation funds.

There may be more to come for retirees. The franking credits decision is just one of several Labor moves that may adversely affect your superannuation.

Self-funded retirees and even some pensioners would have their tax refunds cut under a Labor plan. Photo: iStock

Dividend imputation allows investors to claim a tax credit every time they are paid a dividend from the shares they own. If the credits add up to more than the tax they owe, a shareholder can claim a cash refund.

“This is how we planned for our retirement,” Smith says.

He sees Labor’s plan as “an attempt to steal from us in order to fund a whole range of policies that we don’t necessarily agree with”.

And he is right.

What irks me is that the most industrious workers like Smith will be the hardest hit by the ALP tax gatherers.

I guess all governments now have to tax and tax and tax to keep the welfare wheel turning. Where will it end?

And what damage is being done to this great country’s spirit of enterprise by our narcotic-like dependence on welfare?

Former Labor senator Graham Richardson struck a chord earlier this year when he said governments on both sides were fond of sending out “raiding parties” on retirees because they were disorganised and easy targets.

Former Labor senator Graham Richardson has been critical of both sides of politics’ treatment of retirees. Picture: Ryan Osland

A new lobby group, the Alliance for a Fairer Retirement System, will fight Labor’s proposals.

The group represents millions of senior Australians, shareholders, self-funded retirees and over one million members of self-managed super funds.

Alan Marshall says Labor’s changes will disadvantage current retirees as well as those planning to retire.

Marshall, the president of the Association of Independent Retirees, says: “Successive federal governments have committed to encourage and support those who self-fund their retirement.

“However, in practice, we believe governments have consistently failed to adequately support those in the retirement or draw down the pension phase by restricting benefits or not providing the support to which they have committed.

“There are now more than 1.9 million Australians aged 65 years and over who self-fund their retirement, either in part or fully. The greater majority of these are not wealthy individuals as many seem to infer.”

It means they may be unable maintain their independence from government support in the later years of their retirement.

Everyone loses and taxpayers will have to pick up the slack yet again.

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