Maria Kovacic (NSW, Liberal Party) Share this | Hansard source

I also rise today to speak on the Treasury Laws Amendment (2022-23 Measures No. 1) Bill. Whether it's franking credits or superannuation—or your salary—it appears that the Albanese government is after what little money people currently have left. We heard time and time again before the election from Anthony Albanese, the Prime Minister, that there would be no changes to franking credits and no changes to superannuation under his government. Let me repeat that. We heard time and time again that there would be no changes to franking credits and no changes to superannuation.

Well, then what is this? This is the bill that we're talking about today. I'm sorry to disappoint everybody, but this bill represents sweeping changes to superannuation and franking credits, changes that will impact hardworking ordinary Australians the hardest. The bill is five schedules of changes to super and franking credits in 48 pages. This bill also has a 220-page explanatory memorandum on changes to super and franking credits. This bill is over half a billion dollars in changes to super and franking credits. Let's have a think about that: that is half a billion dollars being taken out of the retirements, the savings and the superannuation accounts of Australians. All this is in the middle of a cost-of-living crisis where Australians don't have very much money left, costs are going up all around them, yet their wages are not going up. And now the government is consciously deciding to make things worse. They are taking a sledgehammer to the savings of Australians. They are taking this money to fund their mismanagement of our economy.

During Senate estimates on Wednesday 8 November, the Minister for Finance, Katy Gallagher, appeared not to realise a change to the franking credit policy was in her budget, denying 10 times that there was a change to franking credits in the budget. The minister later had to correct the record. When asked about the measure in question time on 6 March, the Prime Minister couldn't give a straight answer. The finance minister doesn't know what's in the bill, does the Treasurer know, or are they turning away as they let Stephen Jones pursue his vanity project of raiding the savings of hardworking Australians? Who does know? On 1 January 2021 the West Australian reported that our now Prime Minister said, 'We will not be taking any changes to franking credits to the next election.' On 30 March he then said on ABC Radio, 'We won't have any changes to the franking credits regime which is there.' That's exhibit A of the changes that we're not having. On 15 December 2021 our now Prime Minister told Tasmania Talks, 'We've made it clear that, on areas like franking credits and negative gearing, we won't be taking those policies to the next election.' On 4 March 2022 he said in relation to franking credits, 'We are not touching them.' On 17 January 2022 the Treasurer said, 'We won't be doing franking credits, and I couldn't be clearer than that.' And yet here we are.

Labor's broken promise on superannuation taxes just means that, with the soaring cost-of-living pressures, Australians will be worse off. This is not just another broken promise; this undermines our superannuation system. It undermines the confidence in our superannuation system. Superannuation is your money; it is our money; it doesn't belong to any government. It is your money to deliver quality of life in retirement; it is not a piggybank for governments to leverage tax and spend. How many times does this government want to tax this money earnt by ordinary Australians? Despite promising no changes to superannuation before the election, Prime Minister Albanese is proposing to double super taxes on one in 10 Australians by the time they retire; to stop companies from offering franking credits to Australian investors, super funds and charities; and to tax unrealised capital gains in super, meaning Australian retirees will pay tax on money they haven't even made yet. Let's think about that—paying tax on money that you have not even made or earnt. That's extraordinary.

It is obvious that this government was dishonest about changing super and about franking credits, and it's been dishonest about how many Australians will be affected by these changes. Despite the claim that fewer than 80,000 Australians will be affected, independent research has shown that, by retirement age, more than 500,000 Australians will be hit by this tax. Australians are right to be wondering what will be taxed next. How can we trust this government when it says one thing before an election, over and over again, and then does something completely different? The government is unable to explain how these changes will work. They can't explain how many people will be affected. The Prime Minister says it will impact one in 200 people. The Finance Minister says it will impact one in 10 people. If the government can't explain it, how can Australians be expected to understand it?

The two measures which limit the ability for companies to offer franking credits to shareholders are estimated to raise at least $600 million over the next five years. The tax will fall overwhelmingly on older Australians and superannuation funds. The Tax Expenditures and Insights Statement released last week found that the biggest beneficiaries of franking credits are older Australians, Australian companies—who, as outlined very clearly by Senator Scarr, are employers of everyday Australians—Australian super funds and Australian charities. The budget acknowledged that a substantial portion of the revenue from this measure will fall on Australians' superannuation:

New tax policy measures announced since PEFO also increase superannuation fund tax receipts by $1 million in 2022-23 and $467 million over the 4 years to 2025-26. This includes the impact of the Improving the integrity of off-market share buy-backs measure, which is not expected to significantly impact tax receipts in 2022-23, but is expected to increase tax receipts by $400 million over the 4 years to 2025-26.

That's from Budget Paper No. 1 for the October 2022 budget, page 159.

Page 49 of the explanatory memorandum for the bill makes it pretty clear: the bill ensures that arrangements can't be put in place to release franking credits. That's what it states:

…the Bill … ensures that arrangements cannot be put in place to release franking credits …

The tax increase is despite the Prime Minister ruling out changes to the franking credit regime before the election, over and over again. The Treasury's own talking points, obtained under FOI, confirm that there were significant concerns raised by the public. Over 2,000 submissions were received during consultation. Treasury also says:

Concerns were raised over retrospectivity, policy objective and potential for the legislation as drafted to capture legitimate commercial practices.

Treasury's own document says:

Shareholders … may argue the policy is effectively a tax increase or a winding back of dividend imputation.

Let me repeat that. Treasury's own document states:

Shareholders … may argue the policy is effectively a tax increase or a winding back of dividend imputation.

Schedule 1 amends the Corporations Act to close a loophole in the post-royal-commission requirement for financial advisers to register with ASIC's Financial Advisers Register. The amendments close a loophole to minimise the risk of inadvertent breaches of the law when offence provisions on providing unregistered financial advice commence. The amendments allow ASIC to streamline applications where a provider is authorised by more than one licensee to provide financial advice. Schedule 2 gives the Australian Accounting Standards Board, the Auditing and Assurance Standards Board and the Financial Reporting Council the power to develop climate and sustainability standards. Schedule 3 implements five recommendations from the 2020 Tax Practitioners Board review. This bill also introduces two changes to the franking credits regime that the government estimate will raise more than the half a billion dollars that I outlined earlier. They are contained in schedules 4 and 5 to the bill.

Schedule 4 amends the Income Tax Assessment Act to limit the ability of listed companies to offer franking credits on off-market share buybacks, raising $200 million a year in tax clawbacks. Schedule 5 amends the Income Tax Assessment Act to limit the ability of listed companies to offer franking credits on capital raisings, raising some $50 million over five years. These two measures will limit the ability for companies to offer franking credits to shareholders. The tax will fall overwhelmingly on older Australians and superannuation funds. The tax expenditure and insight statement released by the government in March found the biggest beneficiaries of franking credits are older Australians, Australian companies, Australian super funds and Australian charities, and yet these are the people who are going to be impacted by the changes contained in this bill. Even the October budget acknowledged that a substantial portion of the revenue from this measure will fall on Australians' superannuation. New tax policy measures announced since PEFO also increased super fund tax receipts during that same period. This includes the impact of improving the integrity of the off-market share buyback measure.

Franking credits are granted against company tax already paid by restricting the offering of franking credits. The increase on tax is not from the company issuing the credits but from the individual shareholders who benefit and receive corresponding reductions on their tax. King & Wood Mallesons have described the measures as, 'The federal government is seeking to prevent entities from providing franking credits to shareholders' in what it considers are 'inappropriate circumstances'. The measure reduces the ability for companies to offer franking credits on new capital-raising activities. There is genuine concern that the measure will have unforeseen impacts and wider application than Treasury claims. This tax increase is despite the Prime Minister ruling out changes to the franking credit regime before the election.

As Senator Scarr noted, the coalition senators' dissenting report in relation to this bill is an impressive document, and it is something that should be read and should be considered before any changes are made. One section that I want to read in particular from that report is something that comes from evidence given by Professor Robert Nichol talking about flow-on effects from tax, profitability and shareholder returns as a result of this measure. He states:

If implemented, I expect off-market buy-backs will be discontinued and some companies will choose not to take the on-market option, resulting in some instances of less than optimal capital management, reduced profitability, less tax paid and reduced shareholder returns.