Bill's spend, spend & spend

Discussion in 'Politics' started by balwoges, 14th Jan, 2019.

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  1. euro73

    euro73 Well-Known Member Business Member

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    You’re right. I mistyped. Without retyping, my point was that franking credits should not be refunded for any amount greater than tax liability . The policy should ensure than 30% is paid in tax. No more . No less So if we look at the example of 3.5k you noted above we will find that if refunded , 26.5k of tax was collected against 100k of taxable company income . In the smsf example above , if the 30k is refunded , $0 tax has been received on the 100k of taxable company income . You have illustrated the zero taxation consequences of the current policy settings , perfectly. And this is where the loophole exists that Labor is seeking to close.

    It’s a falsehood to suggest Labor is applying a 30% tax rate . That tax rate already exists. No new tax is being proposed . What Labor is doing is ensuring the tax is actually collected - to pay for .... you know , pensions n stuff .
     
  2. Harry30

    Harry30 Well-Known Member

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    Imputation has 2 important elements or principles. First, it avoids the double tax. And second, it taxes in the hands of the shareholder, not the company. If you taxed at the company level, every shareholder would pay 30%, regardless of their MTR. The argument for taxing in the hands of the shareholder is that it is arguably more equitable. If you have high income, you pay 45% or whatever you MTR is. If you are on a low income, you may pay zero. Far more equitable than a flat tax. Principle 1 (avoding double tax) requires you to return 100% of the tax paid by the company to the shareholders (as occurs now under the franking credit). If some of this tax does not get retuned (as per ALP policy) but kept by the Government, then you are violating this principle of taxing only once.
     
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  3. euro73

    euro73 Well-Known Member Business Member

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    I disagree with you. You disagree with me . C’est la vie
     
  4. willy1111

    willy1111 Well-Known Member

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    It is the generous tax rates applied to Super that allows the loophole to be most generous. It would be more effective to look at tax applied to Super.

    By not allowing franking credit refunds labour are ensuring a minimum 30% tax will be paid on income from dividends, there is no spin on that, do the math and tell me otherwise.

    Why don't banks deduct 30% tax from interest earnt on interest bearing accounts and send it to the ATO?

    Why don't property managers deduct 30% tax from rent and send it to the ATO?

    Why don't employers deduct a minimum of 30% tax from wages and send it to the ATO?

    Perhaps marginal tax rates need to be looked at again, or tax applied to super revisited if they don't have enough to pay for you know pensions n stuff.
     
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  5. euro73

    euro73 Well-Known Member Business Member

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    They can do that - they already charge property management fees , bank charges , and if you have a taxable income you can offset that 30% expense against it . If you do not have a taxable income , you cannot .

    Interest earned on bank accounts is taxed already and the information is data matched to your TFN - and I can offset that with credits and deductions right down until I reach 0 taxable , if I choose to attempt to do so. But I cannot get back tax I haven’t paid .

    Employees deduct tax on salary already and send it to the ATO - and I can offset that with deductions right down until I reach 0 taxable if I choose to attempt to do so - but I can’t get back tax I haven’t paid .

    Property managers deduct fees already - and I can offset that expense against taxable income ( not untaxed income ) as well . Again - I can’t get back tax I haven’t paid .

    There are no other circumstances where I can reduce my taxable income either to a tax free threshold or below a tax free threshold where I can get that surplus / excess back . In every case , i exhaust the taxback once my taxable income reaches zero it’s just flat out greedy ( I’m not against greed just quietly - I’m just saying it’s greedy ) and flat out unaffordable to the country to carry a policy forward that provides for zero taxable income + surplus credits being refunded , and delivering a reduced tax base.

    Especially when you consider the size and scale of the SMSFs that will move to a zero tax environment in the coming decades . May as we just reduce the company tax rate to Zero and give up on collecting any company income whatsoever

    You’re opening up a whole new can of worms if you want to discuss taxing all super :) ...... but the concept of a flat 10% or 15% rate isn’t abhorrent to me .
     
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  6. Harry30

    Harry30 Well-Known Member

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    Those are good points. At the heart of much of the criticism of imputation, is really a criticism of individual tax rates or super tax rates. We hear of a group of individuals paying a low MTR, and we think it is wrong or unjust. But reform is easier said than done, and politically very difficult. You could level the playing field, and tax everyone at a flat 30%. Of course, that would be a massive tax increase for low income earners, and a huge tax reduction for high income income earners. Dividend imputation could be changed so you tax the company once at 30%, but keep dividends tax free (to eleiminate double tax). Some countries do this. But that suffers from the same problems as having a flat personal tax structure. Often we hear stories of the wealthy paying little to no tax, but of course, we largely tax income and not wealth (with some exceptions), so there is nothing inherently wrong with that.
     
  7. euro73

    euro73 Well-Known Member Business Member

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    The neg gearing proposals , cgt proposals , trust proposals and dividend proposals are all about stopping revenue leakage . If it ensures we can afford to keep the joint afloat ... then it has to be done .

    These changes happen all the time . Concessional contributions and non concessional contributions have been reduced - and the sky didn’t fall in. 1.6 million tax free caps were introduced - and the sky didn’t fall in .

    Much of the largess of Howard and Costello is slowly being unwound @ 15 -20 years later, because time has proven the cost to the budget to be unaffordable now that the mining boom money has dried up. The fullness of time is showing those policies to be far too generous and far too expensive to today’s Australia.

    It just is what it is . But I’d rather politicians were gutsy enough to recognise it and say so , rather than letting it become even more unaffordable. People who got the 15-20 year free kick should just say it was great while it lasted ....

    When APRA stepped in , These forums resisted . In time , most reasonable members came to believe APRA should have stepped in earlier . In time I think people will see the Labor policies the same way ..: but they have to win the election first . All of this may be irrelevant come May 18...
     
  8. Angel

    Angel Well-Known Member

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    Yes you did, by omission. Perhaps you have no idea that people in this category even exist.

    I am one such person. I might not rely on this imputation credit to get by on, but there are plenty of retirees and low-income earners who are far worse off than I am. And there are numerous commentators who are ignoring this demographic - the retired nurse on the ABC 7:30 last week for example. Her super wont last indefinitely and she will be drawing it down to nothing at some stage. The ALP's response was along the lines of "She has Super, she must be rich".
     
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  9. Sackie

    Sackie Well-Known Member

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    I hope the ALP keep shooting themselves in the foot and the Libs pull off a semi miracle and slide back in.
     
  10. Angel

    Angel Well-Known Member

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    @euro73 You have a lot to say about removing over-generous taxation benefits because the country can no longer afford them. I totally agree with this.

    So let's talk about removing the generous taxation money being paid to all the people who are in the NRAS scheme, especially those who are getting more back from the government than they pay in their MTR.
     
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  11. willy1111

    willy1111 Well-Known Member

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    The way I see it is companies can't exist without shareholders. When company tax is paid, this is the same as tax paid by the shareholder so when the shareholder receives a refund due to a franking credit it is because they have paid too much tax. No different to a PAYG getting a refund at tax time.

    You say it is revenue leakage, I say it is just simply attempting to increase revenue.

    Given Labours supporter base generally isn't those with money/investments, it makes sense for them to target this group.

    They just want to take take take, oh we need it to pay for schools, hospitals, roads, etc...but are they spending it wisely and efficiently.
     
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  12. Lizzie

    Lizzie Well-Known Member

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    But - you would only get the tax back if you had paid tax, on which to claim against, otherwise it simply accrues to a time where you tax paid is higher than the accrued losses

    Such as us last year - hubby and I own a joint rental - made a loss - could only claim 50% of the losses against hubby's taxable income as I don't have an income high enough to tax hence don't pay any tax on which to claim it back against.

    This year we'll make a tidy profit
     
    Last edited: 24th Feb, 2019
  13. euro73

    euro73 Well-Known Member Business Member

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    That's rubbish. Show me where I said that. You cant- because I didnt. You should retract your comments...

    Oh I dunno .... I spent 13 years working at Centrelink...and not in a back office role in Canberra. Front line in the Newstart and Family Payments sections at Blacktown, Merrylands, Auburn, Mt Druitt , Penrith and Ryde. I spent a decade working in senior BDM roles at Aussie, HSBC and Firstmac. And now I run a B2B mortgage business and property business that works with financial planners and accountants So what do you think..... is this my first rodeo?

    Glad we agree. RE NRAS- those investors are productive purchasers . By that I mean they are taking on debt or investing large sums of cash, and they are receiving LESS than the normal rate of return from that investment, before tax, because they accepting a minimum of 20% less rental income than non NRAS investors. Do we have a situation where one type of Company shareholders is receiving 20% less income than another? Didnt think so. I would also point out that NRAS investors are receiving the Refundable Tax Offset for a maximum of 10 years . In very simple terms - it isnt free money , available indefinitely. It is an incentive paid to provide a social outcome for Govt, for a capped length of time

    Chalk n Cheese.... nice try though !


    They arent spending it at all...they arent in Govt. But if you are asking whether they WILL spend it wisely...who knows? What we DO KNOW is that this Lib Govt spends more than any previous Labor Govt as a percentage of GDP, which is why its so difficult to stomach arguments that are rife with inferences about Labor's inferior economic credentials. It simply isnt supported by the facts.

    The problem with the rusted on voter (of any persuasion) is that they cant see the forest for the trees. In this case, its Lib voters . But in the future it will be labor voters on another policy, Im sure. Sadly, what has evolved in Australia is an increasing inability to take a rational, balanced view on things. Its almost like, once you are team Lib - all things Labor are bad... and vice versa for team labor. We should aspire to be more mature than that, I would have hoped.
     
    Last edited: 24th Feb, 2019
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  14. Fargo

    Fargo Well-Known Member

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    It is consistently obvious you do live in an Ivory tower, suggesting it is fair for tax rates to increase as income falls depending on who manages your money. Guess what the company tax system we have now was implemented by Hawke and Keating who gave effect to the interim reccommendation, and Ralph review, done by Campbell in a review commissioned by Fraser. The franking recommendations in the Ralph review were implemented by Howard but had bipartisan report, because it was deemed simple and fair after 20 years of study. You are deluded if you don't think removing franking wont led to complex loopholes, complex trust, and other complicated convoluted arrangements . Making people give up private health insurance and discouraging them from investing in medical services and research on the ASX isn't going to help healthcare in Australia might help those overseas though if money goes there. Forcing people on to the public system or making them so poor they need a healthcare card doesn't only overburdens a strained public system
     
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  15. euro73

    euro73 Well-Known Member Business Member

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    Is it?

    Did I suggest that?

    Am I?


    Did I say that? You'll have to point me to where I did so.

    Ranting, much?

    @Fargo - all you are interested in is playing the man, not the ball. Without exception - it is your modus operandi. You misquote and misrepresent my comments so routinely your nose must grow with each stroke of the keyboard.

    If you'd like to have a constructive debate about the topic, I'm all in. Otherwise.... run along
     
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  16. Lizzie

    Lizzie Well-Known Member

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    I'm with Euro on this one ... and know people who will be affected (nearing retirement ourselves) but, please refer to my above example as to why
     
  17. willy1111

    willy1111 Well-Known Member

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    The way I see it is companies can't exist without shareholders. When company tax is paid, this is the same as tax paid by the shareholder so when the shareholder receives a refund due to a franking credit it is because they have paid too much tax.

    No different to a PAYG getting a refund at tax time.

    The proposal completely goes against the progressive tax system we have which is why I'm against it.
     
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  18. Lizzie

    Lizzie Well-Known Member

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    Yes - you can claim the franking credit against you PAYG tax, and that will continue.

    The issue under discussion is those who don't pay any tax (or minimal tax) being able to claim the entire franking credit against 0 tax paid - which is not possible with any other investment.
     
  19. geoffw

    geoffw Moderator Staff Member

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    The investor has in effect paid the tax - it's just collected in a different way from other investments. It's collected before the proceeds are paid to the investor.

    A parallel would be if real estate agents were required to pay 30% of all rent to the government, in the same way as PAYG - and the balance paid to the landlord. Then it would be up to the landlord to declare the rent in their tax return, to work out whether they received a refund or owed more tax.

    In that scenario. Let's say, from your previous example. Let's say $16,000 rent was paid, and the agent received $1,000 in management fees, making a net $15,000. And let's say that was your only income, and that there were no deductions. And in that scenario, the agent paid the government $4,500 and paid you $10,500. What you are advocating is that it's OK for you to pay $4,500 in tax - whereas previously you received $16,000, put it on your tax return, and let the ATO work out how much tax you had to pay - which, if that was your only income, would mean that you were below the threshold and wouldn't have to pay any tax.

    Summary:
    Gross rent $16,000
    Agent's fees $1,000
    Net rent $15,000

    Taxable income: $15,000

    If "company tax" were payable:
    ATO - 30% of $15,000 = $4,500 "fully franked"
    Net to you at time of collection: $10,500

    Then you claim the $4,500 under dividend imputation (you've earnt below the threshold), which puts a total of $15,000 in your pocket.

    But what you are saying, and what Bill Shorten is saying, is that it's quite OK for the ATO to collect that $4,500.
     
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  20. Harry30

    Harry30 Well-Known Member

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    I think you have missed the point of the analogy that Willy111 made to PAYG withholding.
     
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