Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

We've had a Medicare rebate freeze for the last six years. We've had cuts to hospitals and cuts to school funding. If we're going to ensure that the budget is sustainable and that we can fund those services into the future, we need to make responsible savings. That's what Labor's policy does. When this policy was introduced by the Howard government, it cost the budget $500 million. It now costs $5.8 billion. It's more than we spend on Australian public schools, it is unsustainable, and we're giving tax handouts to people who don't pay tax in this country. Labor is saying that, if we're elected, we will end that policy.

The PBO analysis of our policy is quite illuminating because it looks at who receives cash refunds for dividend imputation in this country. Fifty per cent of all excess imputation credits refunded to SMSFs accrued to the wealthiest 10 per cent of SMSFs, by fund balance, which had in excess of $2.4 million in the balance of the fund. Eighty-two per cent of those funds had balances of more than $1.04 million. These are not people who are struggling. That is why Labor is doing this, because the claims that this policy targets the poor are not suggested and not supported by the facts. And, of course, Labor guarantees that pensioners won't be affected by this particular policy.

This policy of refunding franking credits also promotes risk and inhibits investment in Australian companies. We all know that it distorts investment decisions. We heard from many who said that they were advised by their accountant or their financial adviser not to look for where the best companies were investing, their research and innovation, their development proposals or their growth into the future; just look for the companies that have fully franked dividends and will return you a guaranteed income funded by the Australian taxpayer. It inhibits growth in the stock exchange, and it's one of the reasons why many start-up businesses in Australia have to go overseas to try and find capital, because they can't get it here in Australia because we have a lazy investment market on the back of this policy.

Many people who gave evidence at this inquiry said that they only invested in the banks and Telstra because of the fully franked dividends that they received at the end of every year. If you're in the retirement phase of your lifestyle, being fully invested in five or six different companies is not a wise investment strategy. It's certainly not encouraging diversification.

The other myth that was propelled by the government around this is that it is a tax. It's simply not a tax at all. We're asking people who don't pay any income tax in a particular year to refund those franking credit refunds that they've been receiving. It's not retrospective. It was announced last year to give people the opportunity to digest the policy and, importantly, to get financial advice from their accountants or their financial advisers. It is not a withholding tax. It's a good policy, and Labor backs it to the hilt.

See this speech in context