The Treasury has admitted that the Albanian government’s proposed crackdown on postage credits could be seen as a sneaky tax increase in an area particularly sensitive for Labor already fighting accusations that it is reneging on its election promises.
The government introduced a bill in parliament last month that seeks to restrict the ability of companies to distribute postage credits to shareholders as part of an off-market share buyback or capital raise.
Postage credits prevent shareholders from paying tax twice. They offset the amount of tax a stock investor pays because the dividends they receive come from profits, which have already been taxed at the company rate of 30 percent.
The new measures, which will generate $600 million, drew overwhelmingly negative public comment labeling them a tax increase or a “reduction” of postage credits, according to Freedom of Information documents released to the opposition.
In talking points for Treasury officials appearing before Senate estimates hearings after the October budget, the department conceded that “there were significant concerns raised by the public” in about 2,000 filings.
“Concerns were raised about hindsight, the objective of the policy, and the potential of drafted legislation to capture legitimate business practices,” the documents say.
‘Treasury is considering the issues raised.’
The Treasury went on to say that shareholders who benefit from the attached off-market credits could argue that the new policy “is effectively a tax increase or a reduction in the dividend allocation.”
Labor’s proposals deal with off-market share repurchases in the same manner as on-market repurchases, which would generate a net budget of $550 million a year.
On-market repurchases are when a company buys its shares through an exchange, such as the ASX, while off-market repurchases are when a company will offer to repurchase shares directly from the shareholder.
Labour’s proposals would potentially hit hardest those living on investment income who are often over 75, superannuation funds and charities.
The government of Anthony Albanese (pictured with partner Jodie Haydon) has been accused of breaking another election promise with major changes to postage credits to be announced
With Labor already facing criticism over its proposed superannuation tax hike, the opposition has seized on the new measures, which the former coalition government proposed but backed down from, as another broken promise.
Shadow Treasurer Angus Taylor said Prime Minister Anthony Albanese and Treasurer Jim Chalmers had pledged no appropriations to take office.
“The Prime Minister and the Treasurer went to the election promising Australians they would ‘keep going’ postage credits, and yet in 10 months they added two tax breaks to Australian shareholders,” Taylor said.
‘This is just another super tax. Another tax on Australian retirement savings. And another broken promise about taxes.
“Whether it’s postage or retirement credits, Labor can’t control their spending and so they look to Australians’ hard-earned dollars to pay for their pet projects.”
The Albanian government has characterized the new measures as “integrity” measures that close loopholes mainly exploited by large companies and institutional investors.
“We took into consideration all the issues raised, including the significant number of campaign responses,” said Assistant Treasurer Stephen Jones.
“The vast majority of investors will not be affected and will continue to receive their distributions franked.”
Australians over the age of 75, Australian superfunds and companies, and charities have been found to benefit the most from postage credits.
Workers would have reason to be nervous that any tinkering with postage credits could raise the unwanted specter of 2019 elections.
Under then-leader Bill Shorten, Labor had little chance of beating the Coalition led by its third prime minister in six years, Scott Morrison.
It turned out to be a shock defeat, however, and Shorten himself blamed much of the anxiety raised among investor-retired “dads” by Labor more to end postage credits.
For the May 2022 elections, Albanese promised no change in retirement.
But late last month, he announced that his Labor government would bar Australians with more than $3 million in pensions from making contributions and paying a favorable rate of just 15 percent, from July 1, 2025, after of the next federal survey.
