Along with blogging generally, the use of RSS and feed readers is enjoying something of a renaissance. This has had something to do with a growing disillusionment with the privacy-invading nature of leaving your interactions to the social media giants (no names, no pack drill … you know them 🙂 ), and the blossoming IndieWeb movement.

One of the leading voices in that movement is Ton Zijlstra, and in an effort to revitalise the use of RSS, he’s asked those of us who both follow him, and still (again?) use feed readers to share their feed lists: 

Show Me Your Feeds….I’ll Show You Mine

 

So Ton … here’s mine. There’s some low-volume feeds in there, and no doubt some link-rot as well (sometimes for the worst of reasons – at least one of these bloggers has died recently, but I can’t bring myself to weed the feed). I suspect there are a few of these writers that haven’t yet returned to tending their own gardens rather than someone else’s …

Recently the ALP announced a policy (effective 1st July 2019 in the event they win the next Federal election) that removes the payment of excess imputation credits to shareholders receiving franked dividends where the tax payable on their income is less than the imputation credit available. The imputation credits effectively become a negative income tax, returning cash to the shareholder as a refund af taxation they haven’t paid.

Disclosure: my own retirement funds are held in a self-managed superannuation fund, which takes advantage of this refund to bolster its income and which is squarely in the firing line of this proposed change. In short, if it happens my future retirement income is likely to be reduced to some extent.

My first thoughts were that is was logical that if there is no tax liability on income, then the recipient of the income can’t be due a refund on tax they haven’t paid (or more likely that the imputation credits are greater than any tax liability – the excess of credits over liability are the “refund” under discussion). The more income that is based on franked dividends, the more likely there is to be an excess credit. Likewise, if a retiree is receiving income from a complying pension fund, that income is tax-free, making any imputation credits an excess, currently refunded.

After reading some of the submissions to a Parliamentary Inquiry into the proposal (most of which, not surprisingly, were unsupportive), I have come to the conclusion that your view of the matter probably hinges on your view of who owns the profits of companies who pay franked dividends, and of course, self-interest. Most of the submissions argued that those profits belonged to the shareholders, and that the tax paid on them by the company was in actual fact paid on behalf of those shareholders (see for example, the Australian Investors Association submission (PDF)). This has some basis – when applying the imputation credits, a shareholder’s income is “grossed up” to include the applicable tax paid on the earnings (with the balancing impact of the tax already paid by the company subtracted when calculating the tax payable by the shareholder). This view then holds that if the tax “prepaid” by the company on behalf of the shareholder, plus the tax paid on any other income the shareholder receives, exceeds the amount of tax payable on their total income they are due a refund of the excess.

The flipside of this is the view that shareholders and companies, while connected, act independently of one another. This view holds that since shareholders cannot directly control the amount of profit declared or dividend paid (or the ratio of dividend to profit), and are not liable for any corporate losses, the company pays the level of tax that it deems appropriate entirely on its own behalf (which will consider the reaction of shareholders), and any benefit accruing to shareholders by virtue of that tax paid is at the discretion of legislators, who can alter existing legislation to achieve policy outcomes they see as desirable. Part of the ALP’s thinking on this is around intergenerational equity and “budget repair”; while I think the arguments around Federal budget/surplus are misdirected, I can sympathise with the taxation equity argument, as retirement-age Australians are currently taxed much less heavily than they were in previous decades, and the taxation burden falls more heavily on working-age taxpayers as a result.

Opposition to the ALP policy from retirees and those close to it is entirely understandable, and predictable. There will be some negative impact on their incomes, and there is some truth to the argument for long-term predictability in the retirement savings regime, given the planning horizons in effect.

In the end, though, there are strategies that can be deployed to counter the effects of the policy changes to minimise their negative impact; and it’s true that most of the impact will be on wealthier retirees. A full review of taxation, particularly in relation to retirement funding, would possibly surface some better approaches than current ALP policy, but the political will seems absent. What we are left with is what the Grattan Institute’s submission (PDF) to the enquiry describes as a “second-best” solution:

In a world where there is no appetite for wholesale tax reform, where the government faces a long-term budget challenge, and where the income tax burden on working Australians continues to rise, a policy that indirectly requires richer older Australians to contribute may be the best we can do. Labor’s policy is secondbest policy in a third-best world.

So yes, I’m ambivalent. The situation is still somewhat hypothetical (while they are currently favoured, there is no certainty that the ALP will win the next Federal election, nor is it guaranteed that they will either seek to or be able to pass their declared policy, and I have no plans for imminent retirement) but there is little doubt that there will be some impact on my retirement income, probably negative. But on balance, and while a more comprehensive review and reformation of retirement-savings legislation would conceivably produce a better policy and some longer-term predictability to the regime, I still find it hard to argue that I should be quite so well-treated in taxation terms that I get a refund for tax not paid, particularly when it comes from my children’s pockets, and particularly when I have the opportunity to adjust my investment strategy to minimise its impact.

In short the answer is a qualified “Yes” …

 

[Update] Removed the remark about the tax coming from my kids’ pockets … there maybe an imbalance in the taxation burden across generations (but that’s a different discussion), but taxation ≠ Government revenue, so no “shortfall” in my tax liability actually has an impact on the Federal Government’s ability to fund public services.

There’s been a bit of discussion on social media since the Coalition’s framing of the changes as a “pensioner tax”, with some of the most ridiculous examples of the type of “hardship” caused from people with tax-free incomes of $160,000pa … it’s been a while since we’ve seen such egregious bullshit on display from a political party – must be an election coming 🙂

 

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This is just to notify anybody who is interested that I have shifted my old “aqualung” and “small pieces” blogs from Typepad to here on a self-hosted WordPress site … I think I’ve cleaned up all the links during the import of old posts, but you might need to be prepared for some confusion for a while 🙂

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It has become one of the most successful charitable memes, certainly more successful than anticipated. In fact, it could be argued that the whole thing started by accident, but however it started, it currently defines “viral”, to the extent that is has attracted criticism for its success. It is, of course, the #IceBucketChallenge, and of course the inevitable has happened, and I’ve been tagged (thanks to my perhaps-not-favourite nephew, Ivan 🙂 ).

I’ll admit most instances of this sort of exercise would usually pass me by without reaction, beyond perhaps a detached amusement. And even now I’m uncomfortable joining in the more frivolous side of the challenge … MND/ALS is still a bit close to the bone at my place.

It’s been twenty years since my late father-in-law was diagnosed, and too short a time between then and its inevitable end. Since then there hasn’t been a day he hasn’t been missed, no event at which we haven’t wished for his presence. His absence is made bittersweet by the genetic evidence he’s left with some of his descendants, particularly his daughter, grand-daughters and the great-grand-daughter he never met … all infected with the same mischief and mayhem, the same joy in life.

So while the Ice Bucket Challenge may be “too successful” I’m not upset about it … and I’m happy to take the graceful exit of donating rather than drenching!

 

MNDASA Clip

 

 

 

 

If, like me, you are in South Australia – donate to the MNDASA here, or the Australian body. Elsewhere, Google your local association and give them some money.

Just like last time, and with as little justification now as then 🙂 , here are my voting intentions for the upcoming Australian Federal election.

Lower House (House of Assembly)
Three years later, the determining factors are still the same: the National Broadband Network and carbon pricing.  So – I’m voting Labor (Australian Labor Party (ALP)) again, because for me, these two things remain the differentiating factors between the parties (there are other differences of course, but less important to me, and tending to cancel each other out in terms of desirability). The Liberal-National Party (LNP) is offering an alternative to the Fibre-to-the-Premise (FTTP) being built out currently; they want to use Fibre-to-the-Node (FTTN) technology with copper termination. There are a number of technical problems with the LNP plan (existing copper being insufficient for the promises being made, not significantly cheaper, slower available speeds, and will probably need to be upgraded within a decade by FTTP anyway). It will be somewhat cheaper, and may be finished marginally sooner, but it is essentially a case of opposition for opposition’s sake. As for carbon pricing, the LNP doesn’t even concede climate change, let alone the need for price signals to change our behaviours as a response to it.
Other issues:
Internet censorship seems to be out of favour this time around so isn’t an obvious problem … until the next time of course.
Both major parties seem to be in a contest for “most stupid” on the subjects of the economy and refugees.
Both are obsessed with a useless and dangerous desire for a federal surplus, sacrificing growth and/or employment for something they can’t control anyway. Government spending should be enough to ensure that aggregate demand in the economy is at a level that provides full, or near-full employment (anything less is a waste of our resources, and comes with immense social costs). In the absence of private sector spending (our current state), and our normal situation of trade deficit (i.e. we’re spending more in someone else’s economy than they’re spending in ours), recession and unemployment are inevitable if the Government stops spending as well. In an economy characterised by a fiat currency with a monopoly supplier and a floating exchange rate, “surplus/deficit” is just a measure at a point in time of the level of demand support the Government is providing. The government funds deficit spending by creating deposits in bank accounts, and if there is a surplus the money ceases to exist – a deficit leaves no future debt obligation as a burden on our children, and a surplus isn’t “banked” to allow future spending.
As for refugees – I’m not proud to be a citizen of a country that has reneged on its human obligation to deal kindly with people needing our help. Both sides of politics here seem to think we have a refugee problem (the total numbers coming here are small by comparison to other Western  nations), and are in a race to see who can appear “strongest” in dealing with it. All they have achieved is to make us look mean and small, and increase the costs (both financial and human) of processing asylum seekers.
Upper House (Senate)
Last time around I voted Greens; this time it will be Labor, with a twist. Greens will be preferenced fairly high – I’m not convinced that giving either party control of both Houses is a good idea, but this time I think Labor is in a little more trouble in the Senate. Side note – with both major parties I have sequenced the vote differently to their suggestion. There are a couple of individuals from both that I would prefer to see out of politics (no names, no pack drill – that might be seen as ad hominem, which isn’t my intention)
Footnotes
Like every election I’ve voted in, I’ll vote below the line; and it’s great to see the return of belowtheline.org.au to make that task a lot easier to manage. If you’re a thinking voter, take a look at the site and you’ll find it’s not so daunting to vote BTL.
I will put faith-based parties last on both voting papers – I have no problem with people having religious beliefs but I think those beliefs have no place in a party system seeking secular government. If you believe in the Kingdom of God, why seek a seat at Caesar’s table?
This election has again tempted the passionate and well-meaning fringe to form political parties for our entertainment … from billionaires to dopeheads, from sex workers to devout Christians, from political neophytes to jaded major-party-castoffs … it’s a cast of thousands, and I wish them all a pleasant polling day.