FRAN KELLY, HOST: Well the Shadow Treasurer Chris Bowen joins us now. Chris Bowen, welcome back to Breakfast.
CHRIS BOWEN, SHADOW TREASURER:Good to be back with you Fran, good morning.
KELLY:Your franking policy barely survived a fortnight before you were forced to rework it, you've now come up with what you calling a Pensioners Guarantee to exempt nearly 300,000 or 300,000 low income retirees. Why didn't you do it in the first place?
BOWEN:Well Fran, let's step through this. This is a big and sweeping structural change to our budget, which improves the budget by around $11 billion, and massively improves the fairness in the system, and deals with a growing and unsustainable tax concession....
KELLY:Yeah it's a big change and you got it wrong.
BOWEN:No, Fran. When you're making a big change like this, if there's a way to protect the policy integrity, which what we're doing does, achieves the policy integrity of our ambitions but at the same time, takes on board sensible feedback, that's a sensible thing to do. Now reform is about leadership.It's about tough decisions, about big decisions. But it's also about not being so arrogant to suggest that when there's a sensible tweak that can be made, which protects 94 per cent of the revenue that we're raising, but exempts 25 per cent of the people affected, that's a sensible change.
KELLY: But you told us this policy, when you released it, was carefully and properly designed, and yet from the second you released it, it was obvious that there were people on pensions and part-pensions who were going to cop it. So you'd known this was coming, you even knew the numbers were, the numbers you gave at the time, but you said it was carefully and properly designed...
BOWEN:And what we've done...
KELLY:What's changed? Why have you changed your mind?
BOWEN:And we've taken a carefully targeted policy and made it even more targeted and even more progressive. Now Fran, 80 per cent of the franking credits...
KELLY:But why didn't you do this beforehand, you knew this was there as part of your design?
BOWEN:Well Fran, when you're doing a big policy change, sometimes it's sensible to take on-board feedback, and make a change which keeps the policy integrity but also protects people who say: 'Look, we understand what you're trying to achieve here, we understand why you want to take this tax concession off the 20 per cent of wealthiest Australians, but here's a better way of doing it, here's a refinement.'
Now Fran, Malcolm Turnbull now has nowhere to hide. He's been running around saying 'this impacts on pensioners.' He's now left to say that he stands by a tax concession for which the vast majority of the benefit goes to the wealthiest Australians. If he wants to defend that, that's a matter for him. We have left him now nowhere to hide in defending the current arrangements.
KELLY:Malcolm Turnbull might be running around saying this impacts on pensioners, but Bill Shorten was running around saying this wouldn't hurt pensioners...
BOWEN: Well he also said...
KELLY:He said it was going to impact people who receive cash bonuses. Was he deliberately misleading people, or was he ignorant of your own policy?
BOWEN:Fran, as it does. I mean 80 per cent of the benefit goes to the 20 per cent of wealthiest households. And after our change today, this becomes even more progressive, even fairer. Now what this does Fran, is say we'll protect 94 per cent of the revenue but will exempt 25 per cent of the people affected. That just shows Fran already 90 per cent of pensioners were unaffected, this just shows how much of the benefit here is going to those who are on high wealth families, how much of the benefit is going to those.
Now we'll take no lectures from the Government. I mean this is a Government which said there was no Banking Royal Commission until the day it was. Had state income taxes which lasted for a day. And went to an election with superannuation policy changes they said were 'ironclad' which had to be completely rewritten after the election because they were unworkable. Now what we are doing, is from Opposition, well in advance of the election, putting out big policies. Big sweeping changes, and where they need to be recalibrated to protect those who are on pensions, we make absolutely no apologies for doing so because this is a big, important change, that is necessary for the nation. We've got the courage to go out before an election and make those policy changes and make those policy announcements and where there's sensible changes which protect the policy integrity, of course we'll do those as well.
KELLY: Did you miscount too? Originally you told us 14,000 full time pensioners with shares would have lost their rebates. The Australian is reporting and I think its reflected in the numbers youve put out that the number has increased to 40,000.
BOWEN: We are looking forward to 2019/20 now Fran.
KELLY: So thats the difference?
BOWEN: What we are doing is outlining the figures in the years in which the policy will apply.
KELLY: So the numbers havent changed?
BOWEN: What weve done is updated the figures to reflect the year that the policy will come into effect.
KELLY: So just to be clear, how many people on part pensions and how many people are on full pensions will be affected if and when youre elected and this policy is in place?
BOWEN: Well all pensioners who have individual shareholdings are exempt, thats 277,000 pensioners with individual holdings, then theres 29,000 people who receive some sort of other payment. Then of course we are exempting those who currently have a self-managed super fund and thats about 13,000 that are linked to part pensioners only.
KELLY: And sorry how many of those 277,000 are full pensioners?
BOWEN: Well everybody is exempt Fran. Part pensioners, full pensioners, everybody under this policy who has individual shareholdings.
KELLY: No I understand that, but the 14,000 figure of full time pensioners you gave us early on.
BOWEN: Well the 277,000 is the global figure, and as I said
KELLY: How many of those are full time?
BOWEN: You mean full pensioner?
KELLY: I mean full pension, not part pensioner.
BOWEN: Well 277,000 is the global figure, and thats updated, it was closer to 200,000 for the year 2014/15 updated to 19/20. The global figure is 277,000 , that covers all full and part pensioners.
KELLY: Yeah but cant you tell us the number of full pensioners?
BOWEN: Well I think the figure in the Australian is correct but thats a prospective figure from 2019/20.
KELLY: 45,000.
BOWEN: Thats right.
KELLY: Now you say this is going to be even fairer and that all pensioners are going to be protected, but is it only all pensioners who are in this position now? Because there seems to be a cut-off date in your policy?
BOWEN: Well all pensioners with an individual shareholding are protected going forward, including those who are not yet on the pension.
KELLY: Yeah but people who are pensioners and have partners in some kind of self-manager super fund?
BOWEN: Where you have a self-managed super fund with a pensioner recipient we have grandfathered that. So those people who have made those arrangements in good faith are unaffected. Now to be clear Fran, we were concerned about behavioural impacts, we were advised it would be a considerable loop hole if you had a self-managed super fund and you could find a pensioner to attach to that to keep your dividend imputation credits, your refundability, that would be a loophole.
So what weve done is grandfather those people who have made those arrangements. Weve also made it very clear that for individual shareholdings going forward, all pensioners, including for people who are not yet on the pension, will be protected. But for self-managed super funds, and we are talking about 13,000 across the country here that are linked to part-pensions, not to full pensions which are so few that its not material, those people are grandfathered and will be protected because they put their arrangements in place in good faith.
KELLY: Okay, but anyone in the future who receives some kind of pension and wants to set up a self-managed super fund or has set one up and becomes on the pension or the part pension, they will be hit by your policy?
BOWEN: A self-managed super fund will not be able to receive dividend imputation refundability. The protection we are putting in going forward is for individual shareholdings held by full or part pensioners
KELLY: Youre listening to RN Breakfast, its quarter to 8 our guest is the Shadow Treasurer Chris Bowen. Chris Bowen the tax cut for companies with turnovers of more than $50 million could pass the Senate as early as today. Youve describe them as an unfunded wrecking ball, will Labor go to the next election pledging to repeal these tax cuts if they get through?
BOWEN: Whatever the Government has not yet legislated Bill Shorten and I will be confirming today, we will be seeking a mandate from the Australian people to repeal, yes. We don't believe these tax cuts are justifiable or affordable. The Australian people will face a choice at the next election: the Government which prioritises tax cuts for big business and we on the other hand who have other priorities, funding schools, funding hospitals and providing cost of living relief to those who are on a low incomes. That is the choice facing the Australian people. For what has already been legislated we maintain our position for continuing to monitor the Budget and we will have more to say about what has already been legislated but for what has not yet been legislated, if the government does pass the legislation sometime this week we will be seeking a mandate from the Australian people to repeal those tax cuts.
KELLY:So Labor will go to the next election arguing that you would wind back the big corporate tax cuts and that Australia would become the first OECD country to increase business taxes?
BOWEN: Well of course whatever hasn't been legislated will not have been implemented by the time of the next election, the changes don't come in until 2019 and so it is appropriate that we are upfront about our plans and we are doing that today. As I said what has already been legislated and some of which has already been implemented, that's a separate question. We continue to monitor that but this is an unaffordable wrecking ball to the Budget. I mean we will go to the next election Fran as the Party with which cares more about Budget repair and Budget balance than the incumbent Government which has as its priority $65 billion worth of corporate tax cuts unfunded at the same time as they are increasing taxes on working Australians by $44 billion through their income tax rise.
I mean if the Government wants a tax debate, we are up for it. I will debate the Treasurer any time anywhere. We have different tax plans, his priority is to increase tax on those Australians earning more than $21,000 but to reduce tax for Australia's biggest companies. My priority is to close down the unsustainable and unfair tax concessions in the system. My priority is to stop the Government increasing tax on those who earn between $21,000 and $87,000. Let's have a tax debate and we will be very clear as we are being today about our plans.
KELLY:And Labor will take Australia to become the first OECD country to increase business taxes. In this world of mobile capital, why would that be a good idea?
BOWEN: Well Fran, this is about Budget priorities. The Budget remains in deficit and as has been evident
KELLY:It's also about investment and jobs and growing the economy.
BOWEN: And Fran we have announced our policy which target tax relief to those firms that actually invest. I mean we have announced our investment guarantee, the cost of around $3 billion over the forward estimates but that is an upfront tax concession for those firms which actually take the position to invest in Australia. Now the Government says we will give away $65 billion and we hope and pray that they will invest it. No guarantee about wages, no guarantee about investment. It can be a windfall gain for investment decisions made many years ago, we say no. We will provide targeted tax relief to those firms that actually decide to invest $20,000 or more in Australia. Big or small, those investments actually create economic activity going forward, we will provide the targeted tax relief. We have a different way of doing it. I accept that our tax system needs to be more pro-investment, the difference is we have designed a policy which actually rewards investment.
The Government has designed a policy which goes to shareholders, which can fund share buybacks, can go to overseas investors in Australia. We have designed a policy which is on the condition, provides tax relief on the condition of investment. Scott Morrison has written a cheque in the hope that it gets invested, we provide tax relief on the condition that it gets invested.
KELLY:Chris Bowen, thank you very much for joining us.
BOWEN:Great pleasure Fran.
