Bill's spend, spend & spend

I cant in all conscience vote Liberal next election even though I will be hit badly by the dividend imputation credits but it seems to me Bill is spending money like a drunken sailor. Surely no one believes he can meet all these promises if/when he is elected. Its all got to come from somewhere ... us!

 

Wouldn't that be China not US?

 

Shouldn't have put us in caps ...

 

I'm not listening to any of it - it's just pre-election BS-ing ... neither major party has shown an ability to make important (and often hard) decisions for over a decade now, so it all just background chatter at the moment

 

They both suck. I'm kind of hoping for a Labor led minority government so nothing can get through.

Cheers,
Inertia.

 

I'm hoping a swag of logical, sane and intelligent independents get thru and make serious stuff happen (ie, NOT Clive or Pauline parties)

 

One can always hope!

Cheers,
Inertia.

 

I just wish they'd stop talking about fiddling with Super ... which is also turning a lot of older Australian off voting for them

 

The Libs always save the money just in time for labor to spend it.

 

What exactly do you mean? Which policies and spending commitments are worrying you?

 

I always find that to be such a hilarious comment that frequently pops up from Libs supporters.. The Libs are just as good at wasting money as the Labs!

Cheers,
Inertia.

 

Last time Labor recorded a surplus was 1989.

 

Was that when they sold off CBA or was it Telstra?

 

So the sale of CSL in 1994 by the Keating Government didn't do much for the bottem line?

Dumb decision really. It was viewed only as a maker of cheap vaccines and had no other worth. If only......

 

This isnt accurate . Labor’s proposal ensures no double taxation occurs. Anyone with a taxable income can continue to utilise franking credits to offset the company tax - which has already been paid to/collected by the ATO - against any taxable incoMe which is also subject to tax payable to/ collected by the ATO.....but only to the point where there is no longer any taxable income payable. So the company pays the tax - the investor doesn’t .

The current policy settings , introduced under Howard and Costello , allow for potentially zero tax collection . Right now, anyone with a taxable income can utilise franking credits to offset the 30% company tax against their taxable income , but when they reduce their taxable income below zero , they are then also refunded any surplus franking credits . In other words - they are refunded the company taxes . Under these policy settings the company pays tax , the investor pays no tax , and then the company tax is refunded to that investor , with the ATO acting as a clearing house and ultimately collection zero tax from the company or the investor . The Govt foregoes any tax at all. It’s costing over 6 billion per year in lost revenue . In 10 years it will be costing double that . One way or another - whether it’s the next Labor Govt or the next Lib Govt - it’s going to go .

The way I see the proposal from Bowen is that they are stopping the opportunity for zero taxation . I do not see how they are introducing double taxation .

Imagine if you had a 100k taxable salary with a tax free threshold of $18,200, and your property portfolio generated 100k of deductions/ offsets. $81,800 of deductions /offsets would reduce your taxable income to $18,200. At that point , there is no taxable income to offset , so would it be reasonable if property investors were allowed to get an ATO refund for the other $18,200 of offsets , at a rate of 30%?

I think what Labor is proposing is more than fair . Howard and Costello’s policy is now costing us more in lost revenue than the entire federal education budget . So I take that view that if it’s a choice between giving generous tax breaks to people with zero taxable income ( that’s taxable income , not income ) or paying for schools and hospitals and nurses and roads and what not .... it’s a pretty easy choice .

But I understand it’s a divisive issue and the Libs Are going to mount quite an aggressive fear campaign , with very deliberate misrepresentation of taxable income v income .

In the end though - this specific team / group / class /generation of Libs just have to go . They are just utterly useless . That doesn’t mean I like Labor - I actually think we should all vote independent just to put a top to bottom broom through both major parties - but if it’s got to be one of them, I just can’t get behind the incompetence and arrogance and of the current mob for another go round

 

This is totally correct - and the first time I heard it explained such was last week ... and as an investor, nearing self funded retirement, I actually agree with Labor in removing this loophole

 

Dividend imputation was introduced to prevent the double taxation of company profits. Before the imputation system, the company was taxed, and the individual shareholder was taxed again when the company profits were distributed as dividends (ie double tax). Imputation was designed to eliminate this double tax problem.

To fix the problem, various counties have taken essentially two approaches You can either get rid of the company tax, or alternatively, eliminate the investor tax. Obviously, you don’t do both. If you eliminate one of them, the problem is solved as you go from double to single tax. Some countries have retained tax at the company level, but made the distributions tax free. Other countries do the opposite.You also have the option of halving the company taxes and halving the individual taxes which can have roughly the same effect. All these approaches have their strengths and weaknesses, but all aim to remove the problem of double tax which all (ALP included) acknowledge is bad policy.

So, how has Australia done it? The approach we have taken in our Dividend Imputation System is to effectively eliminate the tax at the company level, and tax profits in the hands of the shareholder at their marginal tax rate. Note that I have said ‘effectively’, as companies still of course make ‘tax’ payments to the Governent. The company tax however is effectively just a prepayment of tax on behalf of the shareholder. The company profits (grossed up) are imputed to the shareholder, with shareholder paying full tax based on their marginal tax rate. After the shareholder calculates their tax, the shareholder then gets a reduction in his or her tax (equal to the franking credit) for the tax already paid by thr company.

A good way to think about company tax (under dividend imputation) is to see it in a similar way to PAYG withholding by the company. PAYG withholding is not a tax on the company as such, but merely a prepayment of income tax the company makes on behalf of the employee. The employee gets a credit for this when he does his tax return. No different to the franking credit a shareholder gets for the tax already paid by the company, so the tax he or she effectively pays is equal to his MTR (with company ‘withholding’ tax coming out in the wash).

So, under imputation, we end up with single tax, with all company profits effectively taxed once at the marginal tax rates of the individual shareholders. If the shareholder is on a high marginal tax rate, that is what they pay (minus franking credit for tax already paid). If you on a low marginal tax rate, then you pay less (again, minus franking credit for tax already paid). If the shareholder has less than $5,000 in income, or otherwise has a MTR of zero, they would otherwise pay zero tax of their dividends (under current arrangements).

However, under the ALP’s policy, that last shareholder I mentioned above (zero MTR) is now going to be stiffed. The shareholder on the higher MTR, well they are unaffected, as they still receive the benefit of the franking credit. For the taxpayer on the zero MTR, the tax paid on their behalf (captured in the franking credit) has just been snatched by the Goverment. So, high income earner - all good. No need to worry. Low income earner, sorry, you just got done over. And to think, Shorten tells us he hates the rich, and he is all about looking after the WURKAs.

Is the ALP’s policy unfair? Absolutely it is. As unfair as the tax office failing a refund of PAYG instalments of a taxpayer (at tax time) had their income been less than $5,000.

 

I don't see how it is unfair.

The current policy allows for companies to make a profit, of which absolutely no tax is paid on if the receiver of that profit earns under the minimum threshold (tax is paid by the company and then recovered in full by the investor). Example - company pays 30% tax - investor claims 30% tax back - total tax paid on net profit 0% - how is that fair?

Under the changes then the company would pay their tax and then, "if" the investor already pays tax at 32.5% (earning between $30-90k), they pay tax on the income from the share as it increases their income but can claim back the tax already paid by the company. Example - company pays 30% tax - investor pays additional 32.5% tax on increased income - investor claims back 30% tax already paid by company - total tax paid on net profit 32.5% - seems fair

If the investor currently paying tax at 32.5% on the dividend income wasn't able to claim back the tax already paid by the company - then tax paid on net profit would be up to 62.5% (using top tax rate). How is that fair?

 

I don't think this is fair.

What labour are proposing is that any income derived from an investment in shares will attract a MINIMUM 30% tax unless you receive a gov pension.

How is that fair.

The main reason there was 0% taxation is due to 0% tax rate on pension phase in Super.