Subjects: Labor Party, tax policy.
NEIL MITCHELL: Anthony Albanese is the Shadow Minister for Transport, Infrastructure and Cities and he is in the studio with me. Are you sure you are a member of the Labor Party?
ANTHONY ALBANESE: I am absolutely a very loyal member of the Labor Party.
MITCHELL: What the hell are you doing here?
ALBANESE: Indeed I am so old, I was at a branch event last night and talked about when I joined the Labor Party and it reminded me that I am eligible for life membership soon, so that is a bit of a worry.
MITCHELL: When did you join?
ALBANESE: When I was at school.
MITCHELL: You could be thrown out for coming here you know.
ALBANESE: No. Never. I am always happy to talk to you, Neil.
MITCHELL: You are alone.
ALBANESE: I’m sure that’s not the case.
MITCHELL: I am. Now the other thing that surprises me – this new tax policy, you can’t support that, can you? An old Labor man like yourself with a history in the Labor Party caring for the battler, the pensioner and you are going to take money out of their pockets?
ALBANESE: I certainly do support this policy and it is important to go back to first principles here. I actually was a researcher as a young economist in the Hawke Government who worked on the Tax Summit and worked on the dividend imputation scheme and you need to go back to first principles. What is the dividend imputation scheme about? It is to make sure there is not double taxation, so that when a company makes profits they pay tax on it and then the franked dividends get paid to the shareholders.
ALBANESE: And because it has been taxed already, the shareholders are able to offset their tax liabilities – the tax that they owe. It was never, ever intended to be a system that produced cash payments for people who weren’t paying tax and …
MITCHELL: I understand all that but …
ALBANESE: … and that is important.
MITCHELL: … but I’ve still got this problem with your leadership and your leaders are saying this will not hurt pensioners and low-income earners. Now that is palpably wrong. Do you agree with that? It’s going to hurt people who don’t need to be hurt.
ALBANESE: There is another element here as well, which is that the Howard Government introduced this change and at that time it was going to cost some $550 million. This year it is costing the Budget something in the order of $6 billion and within a couple of years it will rise to $8 billion.
One of the reasons why that is, is because since that change was made, a couple of years later the Government changed superannuation so that no tax is paid once you turn 60. It’s all tax-free.
So what might have been an acceptable policy when it was introduced, once that happened it created a complete distortion so that you have people who are receiving $2 million and more in actual cash refunds who aren’t paying any tax, so …
MITCHELL: What percentage of people are in that category?
ALBANESE: There are a range of people who are in that circumstance. What we know, in terms of this policy, is that 50 percent of the cash payments go to just 10 percent of the funds. We know that this is a loophole that should be addressed. Government is about priorities and yes, this is a difficult decision for Labor to make.
MITCHELL: Do you accept that it is going to hurt people like pensioners and self-funded retirees who have not got a lot of money?
ALBANESE: I certainly accept that pensioners will always be better off under Labor.
MITCHELL: No, no, no, no.
ALBANESE: You need to look at what we are doing, Neil. What we are doing is we are going to maintain the system of the energy supplement that the Government is trying to remove.
MITCHELL: That’s all good.
ALBANESE: What we will also do, we won’t raise the pension age, which is what they are going to do as well. We are against that. I also accept that it was Labor when we were last in Government that had the largest-ever increase for pensions in Australian history.
MITCHELL: Now Mr Albanese, you are not a spinner usually.
ALBANESE: No, I’m not.
MITCHELL: Do you accept that people who cannot afford it will be hurt by this?
ALBANESE: I accept that this will have adverse impacts on some people …
MITCHELL: Pensioners included?
ALBANESE: … on some people, but by and large the impact is very much on those people at the top end in terms of, as I said, the figure 50 percent of these cash refunds go to the 10 percent of funds. What you also have …
MITCHELL: What about your unintended consequences? What about your collateral damage: Helen, income of $20,000 a year, $3300 she is going to lose out of that; Brian $40,000 a year, he is losing $7000; self-managed super fund 70 grand a year, admittedly tax-free, he is losing $27,000 – that’s a couple – losing $27,000. These aren’t fat cats are they?
ALBANESE: One of the things that we are doing here, as well is clearly flagging it well in advance of the election, well in advance of any legislation going through, so that people can have certainty in terms of their tax arrangements.
MITCHELL: Certainty? You are changing the goalposts from what they have set up.
ALBANESE: No, the goalposts have been changed since this was set up, Neil.
MITCHELL: That’s true. I’m not saying the other mob is any better.
ALBANESE: Before this was set up there wasn’t tax-free super for everyone above the age of 60.
ALBANESE: And that has been a significant change. When you can see a tax loophole and any economist, any serious economist, will say this is a tax loophole, we cannot simply afford when we have debt above half a trillion dollars now under this Government, when we have increased deficits going out, when we have a $6 billion figure from something that began as a $500 million cost to the Budget each year and rising in the coming couple of years to $8 billion.
MITCHELL: You can’t afford it?
ALBANESE: You need to make choices. Government is about choices.
MITCHELL: You are not going to save it. You are going to spend it. You are not going to pay off the deficit. You are not going to put it towards surplus. You are going to spend it buying an election.
ALBANESE: Wait and see what we do, Neil.
MITCHELL: Will you tell us that you will not spend this money on tax cuts?
ALBANESE: I’m not here to announce – funnily enough – I’m not in a position to announce Labor policy for the next election.
MITCHELL: Do you just accept that these people are collateral damage?
ALBANESE: We will always do more for pensioners than the other mob. Always. We will always do more for pensioners than the other mob.
MITCHELL: Will they get compensation for this?
ALBANESE: I’m not in a position to announce new policy here Neil, as you know. But what I will say as someone who, as you know, grew up in a household that depended upon a single invalid pensioner, I understand how important pensions are and I understand what it is like to be a battler and Labor will always stand up for those people.
MITCHELL: And you do accept, I think, that you are taking money here from pensioners, from self-funded retirees who can’t afford it.
ALBANESE: What I accept is that these changes are difficult, that people will have time though to work through their arrangements. This isn’t the usual course of events, which is you make an announcement on Budget night, the legislation is ready that day as part of Budget Papers and then the changes go through. We are not doing that. We are clearly saying there is an anomaly here that needs fixing, this loophole …
MITCHELL: If it is the fat cats, go after the fat cats. Leave the battler alone.
ALBANESE: That is where most of the money is coming from here in terms of this loophole.
MITCHELL: You are hurting battlers. We will take a break. Calls for Mr Albanese in a moment. Everyone will be generous, won’t they?
ALBANESE: Who knows? We will see.
MITCHELL: Labor frontbencher Anthony Albanese is with me. We’ll take a couple of calls. We’ve got a boardfull so please be as quick as possible. Yes, Rod?
ROD: G’day Neil. My mum’s obviously one of Bill Shorten’s fat cats. She’s an 89 year old Veterans Affairs pensioner courtesy of my dad’s war service in World War Two. He died 20 years ago leaving her a modest house and a comfortable – a small parcel of shares. She’s on a full DVA pension of $24,000. The shares bring in $8300 worth of dividends, of which $3500 is the franking credits. So Mr Albanese and Mr Shorten are quite happy to take away that $3500 from her leaving her with a net income of under $30,000, probably $28,000, so a 10 per cent haircut. I guess she’s got plenty of time to plan for it, Mr Albanese, she can plan to cancel her hairdresser, plan to cancel some of her little treats that make life worth living when you’re 89 and you haven’t done enough for your country.
MITCHELL: Rod, hold on. Mr Albanese?
ALBANESE: I’m very sympathetic with your Mum’s case but of course she won’t lose a dollar from any of those those dividends. She won’t lose a dollar from her pension. It will result in a change in terms of –
MITCHELL: She’ll lose money though.
ALBANESE: Yes, it will result in a change in terms of the treatment of those dividends –
MITCHELL: An 89 year old World War Two widow, was it $20,000, $24,000? She’s going to lose money. Is she a fat cat?
ALBANESE: No, she’s not. I don’t know all of the circumstances and I can’t be – with respect – expected to confirm details about where those investments are and how much they earn, but I’m also not going to say to someone who rings up with an 89 year old mum, whose husband fought for our nation that she is deserving of anything but respect and I certainly have that for her.
MITCHELL: Does this sound like respect?
ALBANESE: The circumstances here are that you simply have an unsustainable loophole that was never intended to be.
MITCHELL: Means test it.
ALBANESE: It was never intended to be a part of the system.
MITCHELL: What’s wrong with means testing?
ALBANESE: There is no country in the world, in the OECD, there is not a single country that provides for cash payments, essentially a refund of tax that hasn’t been paid. That is essentially what the current system –
MITCHELL: Well, arguably it has been paid.
ALBANESE: Yes, but in terms of the income tax –
MITCHELL: What is wrong with just hitting the fat cats? Just hitting you and me? What’s wrong with that?
ALBANESE: What we want, and the proposal here is for simplicity of the system to remove this anomaly that has been identified, that overwhelmingly –
MITCHELL: Can I have a bet with you? You’ll change it and introduce some sort of targeting of the fat cats and let Rod’s mum off the hook.
ALBANESE: Well I’m not a gambler, Neil – and I didn’t think you were either.
MITCHELL: Steven, hello Steven.
STEVEN: Hi Neil and Anthony, I’m just looking at ways obviously to reduce this impact. Just my question is, if I was to transfer my pension plan back into superannuation, superannuation pays 15 percent on its earnings, can I apply those imputation credits to those earnings to offset that tax? There’s very little information out there at the moment .
ALBANESE: Mate, I’m not in a position to give tax advice on commercial radio here in Melbourne. That wouldn’t be fair.
MITCHELL: Hold on Steven, we’ll get your details and we’ll and try and get an answer on it. Veronica, hello Veronica.
VERONICA: Oh, hello.
MITCHELL: Yes, Veronica?
VERONICA: My income now since I lost my part-pension last year is only $18,800 and now I’ll be losing another $2300, which brings me down to $16500 per year.
MITCHELL: Another fat cat?
ALBANESE: Well, hang on. Why did you lose your part pension if your total income is only $16,000 per year?
VERONICA: Because they moved the goalposts last year. My husband died so I’m single now and I’m 82 years of age with no super.
MITCHELL: Okay, and you’re going to lose two grand. Another fat cat?
ALBANESE: No. What the woman has just indicated, sorry, I missed her name…
ALBANESE: …Veronica. Veronica has indicated that the current Government, not us – the current Government – changed the goalposts which is why she lost her pension.
MITCHELL: You’re looking to take an extra two grand out of it!
ALBANESE: I can’t be expected –
MITCHELL: Well, what about the $2000 you’re taking out of her $18,000?
ALBANESE: Well, she will still of course earn her dividends. What she won’t get is a cash payment for income tax that she hasn’t paid. It was intended to be a refund of income tax. That was the system that was set up.
MITCHELL: Will she or will she not lose $2000?
ALBANESE: It’s a pretty simple principle. What will happen is that people who aren’t paying income tax won’t be able to receive a refund on income tax that they haven’t paid.
MITCHELL: Thank you so much for coming in. You can’t win an argument without debating it and I appreciate that.
ALBANESE: I’m always happy to have have a debate and I’m always happy to be here, Neil.
MITCHELL: I appreciate that. Thanks for your time.
ALBANESE: Thanks mate.