Did a niche tax reform become one of the deciding issues of this election campaign, ultimately leading the Coalition to victory?
While there is no way of empirically knowing if Labor’s plan to reform franking credits explains voters’ swings against them, there are some indications that it hurt them and they know it.
But first, what are franking credits?
It was difficult to escape the term “franking credits” during the campaign, and there is still quite a bit of murkiness around it. It cropped up in debates and interviews, with Labor calling it “welfare for the wealthy” and the Liberals deriding it as a “retiree tax”.
Franking credits are a rebate given to some corporate shareholders by the government at tax time. They were introduced in 1987 by the Hawke-Keating government in an effort to stop double taxation on shares. Then in 2001, the Liberal Howard government brought in controversial reforms to the system giving tax credits to shareholders who were not actually paying any tax.
How did it become a campaign issue?
Early last year, Labor treasurer Chris Bowen announced that his party would curb franking credits in order to save $11.4 billion.
It only gained traction when the Liberals hit back against it. Liberal MP Tim Wilson began a months-long crusade against Labor’s franking credit reform policy making it a front-and-centre election issue. In September, Wilson, the member for Goldstein in Victoria, launched a parliamentary committee looking into Labor’s proposed franking credit reforms as a pre-election inquiry.
He went on a pilgrimage visiting RSL club function rooms across the nation, speaking to self-funded retirees about how hard the reform would hit them. The forums were meant to be “hearings” into franking credits with retirees — a way to take in feedback.
But when Wilson set up a website titled Stop The Retirement Tax to allow people to sign up to these hearings, it initially started as a Liberal Party petition.
It also emerged that Wilson appeared to collaborate with a relative who is also a high-profile fund manager — Geoff Wilson. The asset manager happened to manage the politician’s investments, and the former owns shares in the latter’s company, according to the Sydney Morning Herald. This was not disclosed when creating the committee.
Wilson was also accused of privacy breaches, failing to disclose that the petition details were being given to his relative and asset manager Geoff Wilson. Subsequently, Wilson was referred to the Australian Federal Police.
Labor MPs accused him of breaching committee protocols for reportedly proselytising and riling up retirees rather than being there for feedback. Scott Morrison declined to rebuke Wilson over the controversial events. As these meetings took place, the debate over franking credits featured in election campaign leadership debates and it was toiled over on the ABC’s Q&A with treasurer Chris Bowen.
Wilson also sent out over 6000 unsolicited letters encouraging superannuation trustees to sign up to the Liberal Party.
Franking credit reforms are still being hotly contested even after the Liberals won the election.
Business commentator Robert Gottliebsen, who has been vocal against Labor’s policy, wrote in The Australian that retirees decided the election.
Retirees don’t march in the street but they belong to connected organisations which enable them to become a massive political force if they are aroused.
Whether there is truth to this or not, Labor has certainly felt the impact. Labor frontbencher Anthony Albanese, who is standing as a candidate for leader of the Labor Party after Bill Shorten stepped down, told ABC’s 7.30 that his party did not communicate its policy reform well.
“We have not sold the message well enough, I don’t think, that we are interested in jobs and economic growth as the priority, as well as the distribution of wealth in our society,” he said.
And if Labor’s internal pre-election polling has been anything to go by, then the biggest swing against Labor came from Australians aged 65 and over.
Truths and untruths
There were misleading statements made throughout the campaign. The Coalition’s Assistant Treasurer Stuart Robert made the claim that curbing back franking credits would hit some of the lowest-paid Australians.
“Any changes will overwhelmingly hit low and middle-income earners, with 84% of the individuals impacted on taxable incomes of less than $37,000,” he said.
This was reinforced on Wilson’s website Stop The Retirement Tax, where he claimed: “Labor are attacking your full tax refund. After the election they want to scrap refundable franking credits. That will hit your security in retirement and risk pushing many vulnerable retirees below the poverty line.”
But an ABC fact check showed the statement that this would hurt the lowest-paid Australians was “misleading”.
The fact check ascertained: “Taxable income does not include the largest source of income for many retirees: superannuation.”
Treasurer Josh Frydenberg also continued to push the line that “Labor’s $45 billion retirees tax will hit hard working Australians who have done the right thing and saved for their retirement”.
Media coverage — and omissions — may have also contributed to the disinformation surrounding Labor’s policy, fuelling retiree anger.
As the dust settles after the election, The Australian this week published a piece titled “Geoff Wilson’s sigh of relief as policy is rejected”. Wilson is the fund-manager and distant relative of Tim Wilson’s who helped him coordinate the campaign to keep franking credits, but none of that was included.
Do you think franking credits won it for the Coalition? Write to [email protected] with your full name and let us know.
A previous version of this article incorrectly stated that franking credits are dividend imputation taxes.