Teal MPs have split on a $600 million plan to tighten up rules around dividend imputation that the Coalition argues is a broken promise by the government, reviving the debate over franking credits that contributed to Labor’s 2019 election loss.
The Senate’s economics committee will investigate proposed changes to limit franking credits linked to company capital raisings, set to raise $10 million a year, and a broader change to align the treatment of off-market share buybacks with that of on-market buybacks, which would raise $550 million over four years.
The more modest change was first proposed by Scott Morrison when he was treasurer in 2016, but the former Coalition government dropped the policy on dividend imputation, which are tax credits paid to shareholders alongside dividends for tax already paid by companies.
The changes are far less bold than the abolition of franking credits proposed by Bill Shorten’s Labor opposition in 2019, which were fought by Morrison and former Liberal MP Tim Wilson.
But injecting the franking credit dispute into the political arena helps the Coalition build an argument that Labor has reneged on a pledge not to touch contentious tax policies after announcing a superannuation tax rise last week. Labor rejects the Coalition’s comments, accusing it of a hysterical scare campaign.
Shadow treasurer Angus Taylor argued the move constituted a broken promise by Labor and put pressure on teal MPs, six of whom last year defeated Liberals in wealthy electorates where voters tend to have higher levels of shareholdings.
“This is a test on where the teals stand when it comes to keeping election promises,” he said in a written statement.
Teal MPs Zoe Daniel (Goldstein), Sophie Scamps (Mackellar), Allegra Spender (Wentworth), and Kylea Tink (North Sydney) on Thursday voted for Coalition amendments to the Treasury tax law amendment bill that would have got rid of the franking-credit changes.
Other independents, Helen Haines (Indi) and Kate Chaney (Curtin), voted with Labor against the amendments, while Monique Ryan (Kooyong) and Zali Steggall (Warringah) abstained.
The different stances taken by the independent MPs highlight the difficulties they face in supporting a more equitable tax system while protecting the interests of their high-income voters, and add weight to their argument that the group does not act as a party-like bloc.
Daniel said she supported the Coalition’s bid to dump the franking-credit changes because she made an election commitment not to back such reforms.
“I kept my word,” she said, urging Labor to avoid wedging MPs by combining disparate law changes into a single bill to be voted on as a whole.
Assistant Treasurer Stephen Jones dismissed the Coalition’s position, saying the changes would not affect the retirement incomes of everyday Australians.
“How many mum-and-dad investors have done an off-market share buyback? This is targeted at big companies finding loopholes in our tax system, subsidised by Australian taxpayers,” he said.
Opposition Leader Peter Dutton said on Thursday that Prime Minister Anthony Albanese was “lying through his teeth” when he spoke about franking credits and superannuation before the election.
“People now are seeing the agenda that Shorten had, that they voted against in 2019, Albanese’s now rolling out,” Dutton said on radio station 2GB.
Liberal senator Andrew Bragg raised particular concern about the smaller of the two revenue-raising measures. He said the push to disallow franking credits that had been funded by a capital raising being paid to shareholders would result in “grave consequences for the competitiveness of Australian companies”.
“It will deter investment in Australian companies, making it harder for them to raise capital, and more reliant on debt,” he said.
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