Wednesday, 14 March 2018

Low taxable income is not the same as low income

The ALP's new policy on retirees and franking credits has many people either being misled, confused etc on believing people on low TAXABLE incomes is the same as people on low incomes in retirement.

A similar argument was being made when the ALP, announced their new policy in negative gearing. Scott Morrison often did this. Our old friend Sinclair Davidson was it it as well. As I pointed out at the time Banks lend on actual income not taxable income. To imagine a person on say  $20k could gain a bank loan for a property was fantasy land.

In this instance we have something similar. Peter Costello in possibly the most irresponsible policy change by a Federal government enabled income from a Superannuation fund to be tax free. ( Cutting tax from contributions and earnings made a lot more sense.)

Hence A wealthy person when working who of course has a lot of superannuation can retire a millionaire with little to no taxable income. It is these people the policy is targeted at. such people are not paying any tax and still are getting tax credits from the ATO. It is unsustainable.

My guess is that the ALP will need to tweak the policy to help those who retire on the pension but overall the policy does get a tick. In this I agree with Saul Eslake again.