On Tuesday, I announced the next stage of Labor's plan for a fairer tax system. We are closing a loophole 92 per cent of Australians can't use, to help pay for schools and hospitals and to make room for tax relief for families and working Australians.
You might not have heard of dividend imputation, or franking credits. Bob Hawke and Paul Keating created them in 1987 to allow investors to reduce the income tax they pay, when the companies they own shares in give them a dividend. Fair enough.
But back in 2000 when the Budget was in a big surplus and the mining boom was on the way, John Howard and Peter Costello changed the rules so that if you were a shareholder who already paid no income tax, you got a cash bonus from the tax office.
When this first came in, it cost Australian taxpayers about $500 million a year. Within the next few years, it's going to cost $8 billion a year. Every year.
$8 billion is more than the Commonwealth spends on public schools or childcare. It's three times what we spend on the Australian Federal Police.
I refuse to believe cash bonuses for a small fraction of shareholders are more important than a great education for our kids. I can't accept that preserving a tax loophole is three times more important than national security.
When the Budget deficit is eight times bigger than the Liberals said it would be when they came to government and national debt is more than half-a-trillion dollars for the first time ever, this cash handout isn't just unfair, it's now unaffordable.
The Liberals didn't even pause for breath before they started their latest hysterical scare campaign.
I'm confident Australians will see through our opponents and I'm happy to tackle their claims head-on.
We are the only country in the OECD that has a tax system that operates like this.
Under Labor's plan, no Australian will lose a cent from their super contributions, no one will lose a cent from their pension and no one will lose a cent from their share dividends.
Not a single cent.
We're keeping dividend imputation, so you'll still be able to reduce your income tax. But the days of getting a cash refund for income tax that was never paid in the first place will be over.
This is a tax concession that overwhelmingly benefits the top end of town. Fifty per cent of the cash refunds go to self-managed superannuation funds with balances of more than $2.4 million.
Some funds are paying zero tax and collecting a $2.5 million cheque from the tax office each year. Only Malcolm Turnbull would think that's struggle street.
The only party in Australia putting up taxes for low- and middle-income people is the Liberal Party. If you're a police officer on $70,000 a year, you will pay $350 less under Labor's plan. If you're a childcare worker on $60,000, you'll pay $300 less under Labor's plan.
Economic policy is about choices, it's about priorities. If the Liberals choose to keep this loophole open, they are putting a small fraction of shareholders ahead of schools, skills, Medicare, aged care and childcare. They're putting a tiny minority ahead of a fair go for all Australians.
Labor's reforms mean we can guarantee funding for schools and hospitals and for the safety net and services Australians rely on. And our plan means we can help middle- and low-income families with the cost of living and with tax relief into the future.
It's all about choices - and we choose a fair go for all Australians.
