By National Seniors Australia Chief Advocate Ian Henschke
The ALP needs to listen to older Australians and reconsider its policy, announced yesterday by Opposition Leader Bill Shorten, to claw back $59 billion from dividend payments.
While the policy has been framed in traditional Labor language as a means of ‘taking from the rich to give to back to the poor’, in reality it will hurt elderly mums and dads around the nation.
Many of these mums and dads are not former high flying corporate types who have millions squirrelled away in superannuation funds and other investments, but are working class Aussies who have gone without to either completely or partly fund their own retirements.
They have heeded the advice of financial experts that they need more than the aged pension (as of this month singles receive the princely sum of $907.60 a fortnight and couples $1,368.20 combined) for even a basic lifestyle. So many of them invested in shares, the dividends from which would supplement their full or part pension to ensure they had a liveable ‘wage’ in retirement.
Now, the ALP wants to penalise them by removing the tax benefit on those dividends.
If you think only the rich invest in the stockmarket and anyone with shares is living high on the hog, think again.
A total of 14,000 full age pensioners and 200,000 part-pensioners will be affected by the ALP’s policy and the Treasury has estimated more than 500,000 low income earners will lose a yearly average of $1,200. It also shows the largest affected group has a taxable income of under $20,000 a year.
One caller to talkback radio in Melbourne yesterday was receiving a pension of $27,000 pa, plus $13,000 in dividends, taking her annual income to $40,000. Under the Labor policy, she estimated she would lose a third of the dividends, reducing her income to about $36,000. That’s about the same as the national minimum wage, which totals $36,134.80 a year.
Bear in mind, too, that financial advisors say a couple needs about $60,000 pa to live comfortably in retirement.
Two National Seniors members, a married couple who retired 19 years ago and have been self-funded retirees for all that time, say their dividend income will be halved if Labor has the opportunity to introduce this policy.
“We’ll just have to spend what’s left of our super capital and go on the age pension,” they said. “It’s hard to see what that’s going to achieve.”
The reality is many people are concerned because they made their retirement decisions based on a policy that has been in place since July 2000.
Unlike younger folk, as one talkback caller said, these retirees are “locked in: they are sitting ducks”. They do not have the option of getting a better job, a second job, or even any job, if a critical income stream suddenly disappears.
It's the retrospectivity that fails the fairness test. If Labor is committed to this policy – and it seems they are given Shadow Treasurer Chris Bowen’s lack of responsiveness to the arguments against it – then those who have done their sums under old presumptions must be exempted.
Better yet, the ALP will think again on this policy and come up with an alternative that doesn’t inadvertently penalise the people it’s supposed to be helping.