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Pensioners to be hit by Abbott's PPL tax hike



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Campaign Media Release

Campaign Spokesperson Penny Wong

PENSIONERS TO BE HIT BY ABBOTT’S PPL TAX HIKE

Nearly one million Australians who receive a part-pension could be hit by Tony Abbott’s tax hike to help pay for his unfair and unaffordable paid parental leave scheme.

The tax hike comes because of Mr Abbott’s refusal to provide franking credits as part of his 1.5 per cent company tax levy, meaning some age pensioners would join retirees, superannuation holders, charities and universities to be hurt by this new tax.

Age pensioners who receive a part-pension could be up to $800 a year worse off under Tony Abbott.

Age pensioners are the last people who should have to subsidise Mr Abbott’s unfair and expensive PPL scheme.

Tony Abbott's signature policy is just not fair, and it’s unaffordable.

This is how part-pensioners would lose money under Tony Abbott’s PPL scheme:

 Part-pensioners have their income and assets assessed to determine their pension rate.

 Under the Age Pension income and assets tests, part-pensioners with shares would lose money under Tony Abbott’s PPL scheme but wouldn’t receive any extra pension. This is because neither the pension income test nor the pension assets test takes into account money received through dividends.

 Around 350,000 part-pensioners have their pension calculated under the assets test. These part-pensioners have an average of $312,000 in assets. Under Tony Abbott’s paid parental leave scheme, these pensioners could be up to $800 worse off each year.*

 Around 620,000 part-pensioners have their pension calculated under the income test. These part-pensioners have an average of $124,000 in assets. Under Tony Abbott’s paid parental leave scheme, these pensioners could be up to $250 worse off each year.*

 The pension income test uses deeming rates to attribute an amount of notional income to a part-pensioner from their financial investments for the purpose of determining their pension rate. Under deeming, as the actual rate

of return from investments is not taken into account, if dividend returns fall because of the franking tax hit, pensioners will lose income from their shares but won’t get an increase in the pension.

 The pension assets test considers the total value of assets to determine someone’s pension. That total value is not affected by a change in income that flows from the asset (eg dividends).

As a result, almost one million part-pensioners could be worse off under Tony Abbott’s paid parental leave scheme and not one of them will receive an extra dollar in pension.

Approximately 40 per cent of age pensioners are part-pensioners (943,000 people).

To pay for his signature policy, Tony Abbott is promising cuts that hit part-pensioners, retirees, superannuation holders, mum and dad investors, charities and universities. But he refuses to come clean on the full extent of these.

Every day, Australians are finding out a little bit more about Mr Abbott's hidden cuts.

There are more cuts to come and it's time Mr Abbott told all Australians who else will be hit.

(*Note: assumes that assets are Australian shares)

MELBOURNE 25 AUGUST 2013