Former PM says Bill Shorten’s plan to end cash refunds for excess imputation credits restores his original tax framework
Paul Keating has backed Bill Shorten’s overhaul of dividend imputation, saying the system the Labor leader proposes mirrors the original framework he set down in the late 1980s.
The former Labor prime minister, who was consulted before Tuesday’s public announcement, told Guardian Australia the new scheme outlined by Shorten ensured company income was not taxed twice.
Shorten has committed to axe cash refunds for excess imputation credits paid to individuals and superannuation funds.
“The Labor party is returning the imputation system to the framework I designed in 1987,” Keating said. “This did not include cashbacks for people whose average tax rate was below the corporation tax rate of 30%.”
“The key thing is to make certain that company income is not taxed twice. That’s the key thing, and the key to that is keeping the imputation system.
“The Labor party is committed to keeping the imputation system.”
On Tuesday Shorten also unveiled a new tax write-off for businesses investing locally in machinery, plant and equipment, or in intangibles such as patents or copyright.
The new depreciation arrangements will reward businesses prepared to invest in Australia with generous write-off provisions, allowing an immediate 20% deduction of any new eligible asset worth more than $20,000.
The overhaul of dividend imputation – which will stop cash refunds for excess imputation credits for individuals and superannuation funds – will save $11.4bn over the forward estimates.
The new proposal from Labor reverses a change made to Keating’s policy by John Howard and Peter Costello allowing individuals and super funds to claim cash refunds for any excess imputation credits not used to offset their tax liabilities.
After unveiling the two measures, Shorten said Labor was creating fiscal room to offer voters tax relief as well as funding a range of social services. But the government went to war immediately, declaring that the ALP was intent on “stealing” the tax refunds of pensioners and retirees.
“That’s what they are doing today,” the treasurer, Scott Morrison, told reporters, referring to the proposal to end refunds for excess imputation credits.
“They can dress it up anyway they choose, but that is the brutal reality of what the Labor party have decided to do today.”