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Standing Committee on Economics
Implications of removing refundable franking credits

ASHLIN, Mr Rod, Private capacity

BUTTERWORTH, Ms Patrice, Private capacity

CADELL, Ms Lynne, Private capacity

DICKIE, Mr John, Private capacity

ESSLEY, Mr Lyle, Private capacity

FARRELL, Mr Kevin, Private capacity

GAUDART, Mr Cyril, Private capacity

GRAVING, Ms Jayne, Private capacity

GREGG, Mr Jim, Private capacity

HACKETT JONES, Mr Richard, Private capacity

HUCKETT, Mr John, Private capacity

HURT, Mr Horace, Private capacity

KERRIDGE, Mr Peter, Private capacity

McDOUGALL, Mr Rory, Private capacity

McKEAN, Mr Gordon, Private capacity

MORGAN, Mr Rick, Private capacity

MULLER, Mr Keith, Private capacity

MYERS, Mr Bill, Private capacity

O'BRIEN, Mr Ted, Member for Fairfax, Commonwealth Parliament

PAYNE, Mr John, Private capacity

PICTON, Mr Russell, Private capacity

ROBINSON, Mr Graeme, Private capacity

SAVA, Ms Helen, Private capacity

SCHMIDT, Mr Greg, Private capacity

STACEY, Mr John, Private capacity

STUBBS, Mr Alan, Private capacity

SUTTON, Ms Maree, Private capacity

THOMPSON, Mr Greg, Private capacity

TRAVERS, Ms Maggie, Private capacity

TRESTON, Mr Bernie, Private capacity

TRESTRAIL, Mr Ray, Private capacity

WALLACE, Mr Andrew, Member for Fisher, Commonwealth Parliament

WELLS, Mr Wayne, Private capacity

Committee met at 09:11

CHAIR ( Mr Tim Wilson ): I formally declare open this hearing of the House of Representatives Standing Committee on Economics. The ability for investors, including individuals and superannuation funds, to claim their full franking credit refund is an established feature of our tax system and is core to the financial security of many Australian retirees. There is community concern about proposals to remove cash refunds for the franking credits of individuals and superannuation funds, including that it amounts to a tax on the savings of retirees. We note that within Queensland it is estimated that there are about 165,000 people who will be affected.

The committee is examining how the removal of refundable franking credits would affect investors, in particular older Australians who have planned for their retirement based on the existing rules and whose financial security could be compromised as a result of change in policy. This public hearing provides an opportunity for Australians impacted by a change to refundable franking credits to address the committee directly with a three-minute statement. We would welcome your contributions and participation.

We've had a series of hearings in Sydney and Melbourne where we've had representatives from retirement groups and the like, but we're making sure that we're giving opportunities for retirees to directly have their say. So, if you would like to speak today, please add your name to the clipboard to register. John has the clipboard. I already have a full page in front of me. The clipboard is there. If you add your name there, you will be asked to speak for three minutes.

Before commencing, I refer members of the media present—and there will be members of the media who will arrive and may film throughout the hearing or who may very well be monitoring this hearing through the internet—to the need to fairly and accurately report the proceedings of this committee. I say hello mostly to the people from the Financial Review this morning.

I will introduce each speaker and invite them to speak into the microphone provided. The secretary will indicate to you with a sign when you've spoken for three minutes. I will then introduce the next speaker. We do have a limited amount of time, so we will be capping it at three minutes.

Please note that these statements are broadcast and recorded for the public record. I ask that speakers refrain from adversely commenting on other people and be mindful and exercise caution when speaking about their own or other people's private or financial circumstances. As I said, this will go on the public record. And please be aware that these proceedings may be filmed. If members of the public have objections to being filmed, please raise them with the secretariat. The committee will, of course, consider your request.

To start off with we have the local members. We'll start with Andrew Wallace MP. Could you start by giving your full name and then proceed with your statement.

Mr Wallace: My name is Andrew Wallace. I'm the federal member for Fisher. Welcome to the Sunshine Coast. It's great to have the economics committee here. Last week I conducted what I call tour de Fisher. I rode around 26 towns in my electorate. What resoundingly arose out of those 26 listening posts was that this is certainly the No. 1 issue amongst many of the retirees in my electorate. In fact, my statistics show that 7,200 seniors in Fisher will be impacted by Labor's retiree tax. In fact, under these Labor changes most retirees or anyone on an income under $37,000 will lose access to their refunds. This will impact 900,000 Australians nationally, and, on average, will cost them $2,200, but I've had constituents approach me and tell me that for some it would cost them up to $35,000 per annum. This represents a $45 billion tax grab over 10 years in what is, in my respectful submission, an entirely unfair system, hitting those who can least afford to lose that money the hardest, whilst continuing to allow people who earn very good money to retain their credits. It fails the fairness test. It fails the pub test.

Labor's retiree tax punishes independence and hard work. These are people who have worked hard all their lives and have arranged their affairs in accordance with the laws of the day and the Labor party want to pull the rug from under them. I would encourage this committee to do all it can and I would encourage all those present to do what they can to resist this pressure.

What I'm going to encourage everybody here to do, if you are against this process, is to fill out an application I have here. If you want to fight this, if you want to make sure this proposal does not become law, I encourage everyone here to join Liberal-National Party and take the fight out to Labor. Vote Ted O'Brien. I will have applications. If you want to see us later, we are very happy to talk to you.

CHAIR: Cheeky, Mr Wallace.

Mr Ted O'Brien: Thank you very much. I support the words of my colleague the member for Fisher. I thank you and your committee for visiting the Sunshine Coast. Labor's retiree tax is bad news. It's bad policy. It's bad for retirees. It's bad for the Sunshine Coast. It's bad for Australia.

Here on the Sunshine Coast we pride ourselves with having a number of retirees, but let's start with the individuals. In my seat of Fairfax there are approximately 7½ thousand people who will be impacted by this policy. That means that this $45 billion tax grab will see people losing $2,200 on average. If they have self-managed funds they would lose around $12,000 on average. This is bad news for retirees.

It's bad news for the Sunshine Coast, because over 20 per cent of the Sunshine Coast's population is over the age of 65. We are the home of retirees, because we are the lifestyle capital of the country. Therefore, what we will see is a disproportionate hit on this region with this proposed policy. Where 15 per cent of the population across Australia is over the age of 65, we've got over 20 per cent here on the Sunshine Coast. That means locals will spend less in their local communities. This surf club will receive fewer funds. Every shop along the strip that this committee visits today will receive less money. That's less money in the pockets of locals. It's also means, tourism being a key pillar our economy, we will have fewer retirees across the country visiting the Sunshine Coast. This is bad for the coast.

Lastly, it's bad for the country. How could any political party suggest a policy that is clearly going to lead to a reallocation of funds? We will no longer have an incentive to be investing in Australian companies. You'll see investment money going offshore. Kid us not, this is bad for the retiree, bad for the Sunshine Coast and bad for the country.

Lastly, could I say to you, Chair, and your committee, this also sends the wrong signal to younger Australians. I'm the age of 44 and I have had the luxury of living in the country that enjoys freedom and prosperity. What signal does this sort of policy send to the younger generations who we want to understand the importance of self-reliance, having a job, putting food on the table and saving for your retirement—the fundamentals of responsibility? We've gone too far with the sort of policy that Labor's looking at, because the pendulum is swinging way too far towards rights without a commensurate degree of responsibilities. It should be stopped, and I'm more than happy to provide this evidence today. Thank you.

CHAIR: Thank you, Mr Wallace and Mr O'Brien. Next up we have Keith Muller. After Keith we have Helen Sava.

Mr Muller : I'm a 65-year-old fully retired community pharmacist, business owner and employer. Long ago I set up a self-managed superannuation fund in order to be self-sufficient in my retirement. I sold my business in 2011 and continued to work as a locum pharmacist. Upon my turning 60, my super fund entered transition-to-retirement phase. In 2017, I believed I had sufficient funds to fully retire and enjoy a modest but comfortable retirement, so I converted my super fund to pension phase. I did not renew my pharmacist registration and can no longer work as a pharmacist in order to supplement my income.

All of these decisions, of course, were based upon the superannuation rules at that time. I did not dream that the Labor Party would one day propose to pull the rug out from under my feet. I would like to think that any government would wish me a happy and well-deserved retirement. Instead, the Labor Party would choose to portray me to an uninformed electorate as a rich retiree receiving an unfair rebate. The imputation credit is not a rebate; it is a refund for tax that has already been paid. To allow one citizen a tax credit and deny another citizen the same credit would be blatant discrimination. It is also discriminatory that a retiree with their superannuation in an industry fund will still receive the benefit from imputation credits.

The tax refund for imputation credits is crucial to my retirement income and standard of living. Last financial year, my super fund's franking credits totalled approximately $20,000, and all of it found its way into supporting Australia's economy. It is ironic when you consider that much of that $20,000, via GST, fuel tax, other people's PAYE tax and general consumer spending just to name a few pathways, ultimately ended up in government coffers. The government doesn't need to steal it from me by double-taxing my superannuation fund's earnings. Retiree spending is an integral contributor to the economy of urban and regional Australia. The introduction of Labor's retiree tax policy would have an immediate and detrimental impact on Australia's economy. Job losses would result across multiple industries, resulting in less GST, personal tax and business tax being collected. It would not make economic sense to introduce such a tax.

To conclude, I believe that Labor's proposed policy is a blatant attack on a sector of retired Australians who have made a great contribution to our country and have earned entitlement to a secure and comfortable self-funded retirement. The policy would not only damage our economy but, I believe, rip at the very fabric of a fair and just society. I would like to think that common sense will ultimately prevail and such a policy will never be enacted. Thank you.

CHAIR: Thank you, Mr Muller. Next up is Helen Sava.

Ms Sava : I am speaking on behalf of Peter Benkendorff, who is a member of our Association of Independent Retirees of Australia. He's a JP and is unable to attend. This is his submission. We have our own self-managed superannuation fund, which is regulated by the ATO. The total assets are around $800,000, just above the government part-pension level. The assets are mainly, 90 per cent, in stock exchange shares—that is: banks; mining companies; over 25 different companies. His wife and he take the minimum allowed by the regulations in—

CHAIR: No, we can't hear.

Ms Sava : Have we got sound?

CHAIR: Just have patience. Sorry. Technology is wonderful when it works! Can we swap over the microphone? This is not ordinarily a problem, so this is quite odd. Sorry, Ms Sava. Is that better? Okay. Helen, will you continue, please.

Ms Sava : His wife and he take the minimum allowance by the regulations in order to have some growth in the fund. That was about $55,000 last year. The fund received about $11,000 credit from franked dividends. This covers the fees of $4,000 for last year for doing the tax return, auditing and compliance documents of the fund by the accounting firm Accura in Nambour. No shares were sold last year, and they subscribed to some rights—WorleyParsons—but could not afford all allotment of rights.

There are three trustees of the fund: himself, his wife and his eldest daughter, who has put in some compulsory super from part-time work. They are certainly not rich, but own their own house with no debt. Taking away franking credit from dividend payment will cost him and his wife $11,000 per year out of pension payments from the self-managed super fund. We will need to sell off the shares in the fund and get a part government pension. He cannot see that benefiting Australia. End.

CHAIR: Thank you very much, Helen. Next is Jim Gregg, and then could Bernie Treston come to the front as well.

Mr Gregg : Mr Chairman, Jim Gregg is my name. Since retiring 16 years ago, I've had my own self-managed superannuation fund. I'm 77 years of age. I feel quite humbled speaking here after I heard Mr O'Brien because I think he covered in his speech a lot of very pertinent facts about the proposed change to the legislation by the Labor government.

It appears to me—and I'm speaking, I'm sure, at a cross-section of people in this room—that it is a very, very unfair proposal. And, also, it discriminates against, or appears to—my choice of words—it appears to discriminate against self-funded retirees. It has the effect on the people that find it very difficult to be able to fight this proposal. It's not as if they've got behind them the company structure. However, they have saved and established their own self-managed superannuation fund, abiding by the laws, which have been the same, as I gather, for the past 18 years. But, more importantly, these people have invested in Australian companies. There has been a proposal, there has been a suggestion, that, if it came in, you could invest in overseas companies. I would say that that could be one way to lose money.

You invest in Australian companies who pay a dividend, who pay their 30 per cent tax, and they supply an attached franking credit. People who invest in these companies haven't invested in Ponzi schemes, haven't invested in penny dreadfuls. They've invested so they can fund their retirement and not be a burden on the Australian welfare society. Yet the proposed change by the Labor government, if elected, is to hit the people who have saved and invested in their retirement. The savings, so they say, will be directed into health and education. I say 'maybe'; have you heard of the word 'immigration'? The proposal appears to be very unfair for self-managed super fund people, compared to the industry and retail funds. And some of the industry funds, of course, are union industry funds. And in these funds—

CHAIR: Thank you, Mr Gregg. Unfortunately, we need to move on to the next person. Do you want to start, Mr Treston? We're just going to move some of the tables forward and we can actually put more chairs in.

Mr Treston : Thank you, Mr Chairman.

CHAIR: Next up is Rod Ashlin.

Mr Treston : Welcome to the Sunshine Coast. We're very pleased to have you here. My name is Bernie Treston. Amongst other jobs I've inherited is the president of the Queensland branch of the Association of Independent Retirees. Now, when we talk about independent retirees, we are the people who have saved for our retirement, and it doesn't mean that we are all fully independent. We've surveyed our members at the Noosa branch—we've got 150 members at the Noosa branch—and half of our members are partly dependent on government pensions and otherwise. So, when we say 'independent retirees', many of us are not completely, 100 per cent. And that means that we are grateful that there has been a system for the last 20 years of having franking credits and getting the credit for them. I could give you facts and figures of so many people, but I don't propose to go into the figures of the individual matters that we have. As I say, the figures are there. Half of our members are in self-managed super funds.

This proposal is really cockeyed. It is discriminatory. It hasn't been thought through. When they announced it in the first place, there was an uproar by some of the unions, so overnight they suddenly changed their policy. Well, it's time to change the policy again, because when it's analysed, as this committee is hearing—in Townsville yesterday and in Sydney and Melbourne, and you'll hear more today—it is discriminatory and it doesn't do what it was supposed to do. Plus, when Labor put out their first set of figures, they ignored completely the fact that the coalition had made changes to superannuation taxation requirements so that people with large amounts of superannuation are now paying tax on their super. So these things are quite cockeyed.

Another category that the people who are implementing these policies have completely ignored and that hasn't been brought to light anywhere, as far as I can see—what about the farmers, the dairy farmers and the cane farmers? They've been ignored completely. I've got a case study, and a very close case study, because it's my brother's. On his cane farm, his average income from farming operations is negative $10,000 a year. I can give you the precise figures if need be. He gets $6,230 per year roughly, averaged over the last eight years, on franking credits. These franking credits are very valuable to him; they're how he survives. Fortunately, in some good years he invested in shares and he gets some income from those shares. He also gets income from franking credits. But dairy farmers and cane farmers can't get a government pension, because some of them have assets valued at a million dollars or so. Any reasonable cane farm has that value. So be reminded that this cockeyed proposal has missed a lot of people. On behalf of the retirees in this area, we ask that it be abandoned.

Mr Ashlin : I'm a retiree on the Sunshine Coast. I'll be very brief. There are rules that limit the maximum contribution to superannuation. I'm sure most of the people here today have not handled more money than many of the people who now rely totally on the government for a full pension. The difference is that they have been responsible people who have saved for their own retirement and now cost the government little or nothing. As a reward for this, the Labor Party are proposing to double-tax them. This is totally unfair. Being penalised for responsible financial management is hardly the example that should be set for the young people of today. Thank you.

Mr Picton : Thanks for allowing me to speak. All governments would like us to be self-funded retirees, but they are always chipping away at the edges of our sustainability. We have worked extremely hard in life to get where we are today, scrimping and saving, cutting corners, going without, always with the end goal of being reasonably well-off in later life. How stupid we have been to follow that work regime! We should have done as a lot of others have done and just lived for the day and then gone onto the pension.

Since we retired, we have lost the part-pension, due to the current government altering the assets test limits. Now, when Labor takes over, we will lose our imputation credits because we are no longer pensioners. If they continue chipping away at our self-funding efforts, we may end up on the pension, which they don't want us to be on. This does not make any sense at all. If we want to reduce our assets to get on the pension, we are restricted to $30,000 for our family over a five-year period. But if we go on a world holiday and spend one-half of our assets overseas, which is no good for Australia's economy, we're then under the assets test limit, which enables us to get on the pension. Once again, this does not make any sense at all. If we had a part-pension, we would be spending it, which is good for the economy. If we had a part-pension, we would not be losing our imputation credits. If Labor gets in we will be a lot worse off than we are now. Too bad about looking after hardworking Aussies!

It's all very well for some pollies getting their megapayouts per year. We have to survive on what we have scraped together to last for the rest of our lives, maybe 20 years. My end story was going to be something about Labor, but I'd better not say that.

CHAIR: For what it's worth, Mr Picton, this is actually a proceeding of the parliament, so you're covered by parliamentary privilege. Next up is John Payne.

Mr Payne : The main issue for me, apart from the financial ones—there are many case studies, and no doubt thousands of pages have been written, but basically to me it's a moral question. If the issue of franking credits is a problem, I believe that the sensible thing would be to scrap it across the board, for everyone. We mightn't like it; however, it would be fair.

We have a situation now where, if you are a pensioner—I think the asset limit is $840,000. If my next-door neighbour has assets of $845,000, he loses it and I get it. So the pensioners keep it. The top end, above the $1.6 million or $3.2 for a couple, can possibly offset it against other things. And generally one would have to accept: if I had $3.2 million I'd be reasonably happy.

It's again the middle bracket that's getting hit. It's the people between $840,000 and $1.6 million, and I would suggest that could be many people in this room. As always, it's the middle people that seem to get hit all the time. To me, it's totally unfair that this has happened. Scrap it altogether or don't scrap it at all.

Ms Butterworth : My husband, Barry, and I retired five years ago at the age of 67. Before we retired, we focused on setting up our super fund so that we'd be financially secure and not have to rely on the government for support. Over the last five years that plan has gone really well. But now, with Labor intent, if it becomes law, on taking our franking credits away, we will lose a third of our income, which will shatter our plans.

There are some issues in the proposal that I think are unfair. One that's very blatant is the fact that they intend to allow the part-pensioners to keep their franking credits. So in that instance there will be quite a few part-pensioners who will then be better off than fully funded retirees. We don't ask the government for anything, but we do want to be left alone. We want to be able to keep what we have earned and what is rightfully ours. Thank you.

Mr Gaudart : Thank you for letting me speak, Chair. I'm retired and I'm 70 years of age. My wife and I have an SMSF. Our values were to work hard in order to build a better life and, towards this end, like many of us in the room, we saved for our later years. We lived a simple, comfortable life and saved whenever we could. As an example, to improve my ability to earn and save more I even went back to university as a mature age student, working full time, so I could earn a little more and save a little more for my retirement and a family's wellbeing. We invested our savings mainly in superannuation and in equities. We invested our savings according to the rules of the day. I stress: the rules of the day in good faith.

I retired five years ago believing we had been proactive in funding our own retirement. I now realise, stunned, that all we have planned and worked towards and thought we had achieved according to the rules of the day could be undone if the policy of scrapping the refund of excess credits is implemented. I cannot go back and start again. I am 70. In my senior years I could lose up to 25 per cent or more of my income. 'Where is the fairness and morality in that?' I ask. I reject the suggestion, having invested within the rules, that I have somehow rorted the system. I am comfortable but not rich by any reasonable yardstick.

There are alternative compromises, the first one being: don't have that policy. But, if you have to have it, grandfather it so people like us, who have had our time, paid our dues, are not penalised. Grandfathering is difficult but not impossible if the will is there. This would avoid large refunds we hear about and take care of the future. I appeal to you not to implement this proposal to discontinue the refund of excess credits. Australia is a fair go country but there is nothing fair about punishing our seniors financially in this instance. Thank you for letting me speak.

Mr Stubbs : I formerly lived in Melbourne and retired at the end of last year after teaching for about 35 years near Tim's electorate, in Hampton. My wife and I—she's a former teacher—both worked very hard. We saved and we made the great decision to buy up here in the Sunshine Coast. I'm not speaking on my behalf with regard to how it's going to hurt us. We're not going to lose very much in imputation credits. But I joined Noosa AIR, which is a terrific group of people—I'm on the committee there—and I see the people who've been retired for many years. There is that gentleman who sold his business as a pharmacist and can't come back into the workforce. My wife can come back into the workforce and do some part-time relief teaching. But here is the thing that really worries me about this—and I'll declare that I was a Labor voter as a younger man, and I worked for the Victorian Secondary Teachers Association as an assistant secretary, an unelected position, for about four years, progressing education quality for students and for teachers. I think this is really quite hurtful, because what's out in the community up here is: this has got nothing to do with trying to raise money for education and hospitals. If Labor wants to do that, bloody take that out of the taxation—that they're probably going to increase—like any responsible government has done in the past. A lot of people I know think that this is a class-envy issue for Labor, and I don't see much to say it's not. You're attacking groups of people, where the word around is that: 'These people who've got these self-managed superannuation funds are rich; they've got plenty of money. And they don't vote for us anyway, so let's attack them because they can't hurt us.' Well, what's quite interesting is: people are moving—people are actually getting very active. And thank God we've got a Senate and we've got Independents, and thank God we've got people who've picked up on this, like the Derryn Hinches, who know they only need a certain percentage in the Senate to be able to hold their position. So I don't think it's a foregone conclusion that Labor will be elected, and I don't think it's a foregone conclusion that, if they do get elected, this will be passed into legislation. Thanks very much for listening.

CHAIR: Thank you, Mr Stubbs. Next we have Ray Trestrail. And could we please have Rick Morgan to the front.

Mr Trestrail : I believe that the Australian economy depends not only on providing an adequate welfare system but also on encouraging everyone who is prepared to do so to aim to be independent.

CHAIR: Ray, just hold the microphone a little bit lower.

Mr Trestrail : Okay. My wife and I both come from a poor background. We worked damned hard, and invested our surplus money—what little we could get—into being independent. We spent our 40 years working, up to retirement age. And, strangely, we have continued since then to pay tax. I've already paid tax for 75 years. We earned our income by investing in Australian companies. Australian companies pay a certain amount of tax. In exchange for that, they give us a franking credit. I think even Paul Keating admitted it's fair that the tax, having been paid, doesn't have to be paid again. They've given it to us. We're entitled to it. It seems to me wrong that they're going to take that surplus imputation credit from us and give it back to us as welfare.

We can't go back. We can't turn the clock back. We obeyed the rules of the day. We can't go back and start again.

One thing I have already decided to do is to no longer give any surplus money to Australian companies, because what's the use? It's only going to be taken away from me. And this, I believe, is unfair. So I think that what is being proposed is totally wrong and against all the benefits of Australian society.

CHAIR: Thank you very much, Mr Trestrail. Mr Rick Morgan, followed by Ms Maree Sutton.

Mr Morgan : Thanks for letting me speak. I've been following this debate, and everyone here has said some very wise words, and I'm not going to repeat what a lot of them have said; I think it has all been said. As to my own personal situation: a few years ago I had to have open-heart surgery, and that cost 40 grand. We've had private health cover all our lives, and, if this franking credit business happens, that'll probably be one of the first things that we'll have to let go—our private health cover. How smart is that—on the Labor point—that you'd put more pressure on the public system by us getting out of our private health? I don't have three minutes. That's just one point I'd like to make, and it's a very important point for my wife and I. So thanks for letting me speak.

CHAIR: Maree Sutton, followed by Lynne Cadell, could you come to the front.

Ms Sutton : I am the chair of the residents committee of the Living Choice village on Kawana Island. I know for a fact that a large number of our residents—and two of them have already spoken here today—are in the same position as we are; that is, we will be looking at losing 30 per cent of our income if this becomes law.

I am originally a Kiwi by birth and I'm an Australian by choice. I have lived in this country for something like 35 or 40 years. I have never ever taken one cent off the government in any way in any type of dole payment, pension payment or any other thing. I have, however, owned businesses, as have my sons, and we have employed a large number of Australians. The last business I had before I retired was a real estate agency. I worked seven days a week, 10 hours a day, for many years to make sure that I did not become a drudge on Australia and its taxpayers. My retirement was planned based on the rules of the day. Now they are talking about changing the rules.

One of the major points I would like to bring up, if something hasn't been mentioned, is that as we age and in fact get to the end of our lives, all of us are probably going to need to go into care. As you know, you cannot go into care these days for any less than about $400,000 or $500,000. What's going to happen now to those of us who are planning for this event eventually? It's now not going to be able to happen because we will not have the funds to be able to put ourselves into these homes. Who's going to pay for that? That I'd like to know. That's another thing that I think needs to be brought up. Thank you, everybody, for your time, and I do hope that everybody agrees with what I've said.

CHAIR: Lynne Cadell, next up. Gordon McKean, could you come to the front of the room, please.

Ms Cadell : Good morning. I'm 75 and work 39 hours per fortnight as a part-time personal carer in an aged-care facility. I was previously recipient of a small part-pension until the present government changed the assets test. This reduced my annual income by some $4,000 per annum. I followed the mantra of 'work, save and invest', from which I benefited, as did the government and the taxpaying public. I presently have a SMSF, as well as a smaller industry based superannuation policy. As I'm now 75, I can no longer save to super, although, under this scheme, my employers are legally obliged to contribute. I would personally lose some $7,000 under Labor's proposed changes, $2,200 of which I use to pay for accountancy, audit fees and GST. If the above assets test changes, I will be down about $11,000 per year.

As most of you would know, I could sell my home of over 16 years, buy another more expensive one or continue to work as long as possible, giving the majority of my assets to my overseas son and his very young family. Then, after five years, under current legislation, I can claim a single pension. Clearly, due to the physical and mental demands of my job, it is unlikely that I can work for another five years but will drill down on investments to supplement my dividend income, thus maintaining my lifestyle of around $35,000 a year. This is hardly a wealthy retirement.

The end result of this strategy would be to send the money offshore; thus, my assets would be lost to this country. Or I can upgrade my home to live, perhaps, close to the beach and subsequently claim $23,000 for a single pension. This has further implications down the track, as the previous speakers have said, as I would potentially qualify for aged-care assistance either at home or in a facility and would also drop my minimum health insurance to rely on the public system. Furthermore, if I adopt this strategy, the vast majority of my super will have gone and, along with it, the 16 per cent tax to the Commonwealth on my debt—and all this for somebody who was happy to retire with my current franking credit refunds and to have Centrelink amounting to $10,000 per year. Under Labor's stated policy, I'm sure you know this is the situation for many if not all. Thank you, everybody.

CHAIR: Thank you very much. Mr McKean, and then Kevin Farrell next.

Mr McKean : I fully support all the arguments that have gone before against this proposal. I won't cover all those again, but I will make some statements. It's probably not worth running anything else.

The interaction between tax, superannuation and social security is complicated and, frankly, a mess that needs to be sorted out. People generally don't understand it, and in this environment in waltzes a prospective PM grabbing a bit of low-hanging fruit, not thinking through the issues, then back-tracking a couple of weeks later and then only partially covering up his tracks. Finally we get some late advice from our incoming Treasurer, Mr Bowen, who says: 'Oh, you should get some of your assets overseas. Don't have them all in Australia.' That's good advice, isn't it? The only thing he didn't say was, 'Also beware of political risk,' because it's pretty heavy under the ALP's proposal.

The proposal is dressed up as a grab on rich people. In fact, it's hitting—as you've heard today—the not-so-wealthy and the people that have saved under the current rules. Where do you go from here, you might ask? 'Well,' says Mr Bowen, 'you can go to industry funds, and we'll look after you there, and we'll funnel a bit of this money back to the ALP to help keep us in government at the next election.' Outside super, you just go and spend it, as people said, and go onto the pension, but be careful: you may not still get your franking credits because of the web that Mr Shorten put in the system way back last year. So, outside of super, what do you do and what sort of assets do young people put together to have any trust in the government to allow them to plan for their superannuation? As you can see from the current generation, there's very little interest in this, and I suspect it's going to get worse and worse as the generations proceed. Thank you.

CHAIR: Thank you, Mr McKean. Next is Kevin Farrell, and then after that is Maggie Travers.

Mr Farrell : Good morning, Mr Chairman, members, ladies and gentlemen. I'm approaching 76 years of age and am a self-funded retiree, after paying income tax for some 50 years of my working life. My wife and I live on my super pension. It's not an SMF, and it's also not with an industry or large retail fund. In my written submission, I've given the committee some detail of our financial assets, but I'd prefer that to remain private at this point. Suffice it to say that the balance in my pension fund is modest, and I'd be in the middle group described by John Payne earlier.

Outside of super, I have a handful of shares which produce franking credits just sufficient to pay a tax accountant to prepare our income tax returns. If a Labor government limits the franking credit benefit to grandfathered government pensioners as well as to industry and some major retail funds, obviously I'll have to find the tax accountant's fee elsewhere. More importantly, how will it affect my super pension fund? Of that I'm not certain. I'm invested in funds, not direct shares. I've asked my financial adviser how I'll be affected, but he hasn't got back to me. I suppose that's probably a hard question to answer.

In regard to Labor's plan to introduce a retirement and pensioner tax, I believe it is discriminatory to tax people on the basis of who manages their super. It's also discriminatory to favour people on government pensions up to a certain date over those who qualify for a pension after that date.

In response to criticism of his plan, Chris Bowen has asked us, for the sake of argument, to consider the hypothetical situation where every shareholder is a retired nontaxpayer, resulting in an effective corporate tax rate of zero under the present system. Now, his premise is absolute nonsense, as the chance of all the companies in the ASX200, say, having no shareholders other than retired nontaxpayers would be zero. Such an argument would earn him an F in a high school debate. It's just as stupid as saying, or starting off by arguing, 'Suppose the earth was flat' or 'Suppose pigs might fly'. The only positive thing I see from this for me is that if Labor gets their way I'll no longer be considered by them to be a retired nontaxpayer. To me that's parasitic.

CHAIR: I'm sorry, Mr Farrell, we need to end there; we need to move onto the next person. Thank you very much. Maggie Travers, and then Horace Hurt.

Ms Travers : I'm Maggie Travers. I drove from Tin Can Bay this morning to be here. Thank you very much to everyone for the comments and arguments that I heard this morning. I agree with them all. Like many of you, we have our SMSF. Since my late teens I have had Australian shares. I believe very strongly in investing in Australian shares, in Australian companies to keep our beautiful country going, and I'm just devastated by the implications of the Labor policy. Like many of you, approximately a third of my income will be wiped out. That's really about all I want to say because other people have already spoken very well. One of my other deep concerns though is for the primary producer small business, so I was very interested to hear about what the effects would be on the dairy farmers and canefarmers. Thank you.

CHAIR: Thank you very much, Ms Travers.

Mr Hurt : Good morning, Mr Chairman. My name is Horace Hurt. I don't intend to repeat some of the things that have already been gone through, but one aspect of the system hasn't been brought up. My wife and I have shares. We do not have a super fund. Our income is entirely from shares—except for a small amount from interest, which is hardly anything. We both have our own individual shareholdings, which makes it difficult for us. If you have to get a seniors health card they aggregate all of your income to find out how much you're going to earn so that you can get a seniors health card, and if you want to get a pension they add up the entire income of your family. But when it comes to this feature it doesn't work that way.

My wife and I independently pay tax or put our returns in. The difference is that we will both get taxed twice. If we were to put all of our assets under one name the difference for us would be $8½ thousand. That's what we would lose simply because we are both independent taxpayers. Our assets are approximately the same. We are both entitled to the low-income tax offset, so we are not in the rich category at all. I worked out a whole series of figures where the more you have in shares at about the $2 million point the tax credits are cancelled out completely and anybody who's got $3 million, $4 million, $5 million in shares is not going to lose any money whatsoever. So, they're not attacking the rich people; they're attacking the small people. Thank you very much.

Mr Robinson : My name is Graeme Robinson. About 25 years ago, my wife and I set up our own self-managed super fund. We built up a business. We worked very hard. We salary sacrificed so that we could put enough money together to support ourselves during our retirement. We retired about 13 years ago. We've never taken a cent from the government, and we don't want to; we want to be self-reliant. Over those 13 years we have saved the government—that is, the Australian taxpayer—almost $400,000. If every retiree could achieve that, then imagine the amount of money that the government would save.

With the franking credit issue, we will lose between 25 and 30 per cent of our income, which is going to be very hard to take, which means we'll have to cut costs in other areas. My opinion is that, coming close to the next election, we are considering selling all of our shares—most of our investment is in Australian shares—because I can see if Labor gets in, the share market's going to take a huge dump and we would lose so much money. So we will look at investing in another area. I would suggest, if Labor does get in, that the 900,000 retirees who are affected should take a class action against Bill Shorten for abuse of the elderly.

CHAIR: Thank you very much, Mr Robinson. Mr Stacey?

Mr Stacey : Good morning. I'm John Stacey. I've been a self-funded retiree for some time. Most people have said nearly all that can be said about this issue, but I would just like to say a couple of things. Bill Shorten floated this idea without any thought about anything else; it was just a tax grab. He put it as a tax on the rich, but in fact anybody who's rich will have other investments and will not be affected at all because they will still get the benefit of a credit—not a tax refund, but a credit.

The other thing that I would like to say is that Chris Bowen was quoted the other day as saying it's part of the tax reform and that he and the Labor Party had a mandate because they won the Batman by-election. I think that is entirely ridiculous, but he did say it. I would just like to point out that negative gearing, which he associated it with, is tax reform. You mightn't like it, but it's tax reform because it affects everybody doing that process. This is not; this is punitive tax on self-funded retirees and other people with shares and no other income. It's purely punitive; it amounts to 30 per cent tax on people who can't afford it, whereas other people in the same category are maybe paying 10 or 15 per cent. Anyway, that's what I wanted to say.

CHAIR: Thank you very much, Mr Stacey. John Dickie?

Mr Dickie : My name's John Dickie; I'm a 74-year-old retiree. I started a self-managed super fund back in the nineties. I retired in 2003. I was a wage and salary earner for most of my life. I've mainly invested my super fund into Australian shares; 85 per cent of it is in Australian shares. The impact on me of the change of imputation credits would be approximately $1,000 a month—25 per cent of my income. It's a significant impact. I guess I would say to Bill Shorten that I'd like him to react to what would happen if some of the labour union members were asked to drop their salaries by 25 per cent. You could imagine the sort of uproar there'd be in the union movement and in the community in general. Thank you.

CHAIR: Thank you very much, Mr Dickie. I call Richard Hackett Jones and then, please, Peter Kerridge to the front.

Mr Hackett Jones : Thank you, Chairman. My name is Richard Hackett Jones, as you've just stated. To get down to business, before this mob goes and lynches me, I should point out that for the last 20 years I've been an advocate for the abolition of the top two scales of taxation—that was the old 40 per cent and 45 per cent we used to have. But, in any event, franking as it now operates should cease. Dictionary definitions of words such as 'imputation' and 'franking' bear no correlation with the interface between corporate and personal income tax. The arithmetical expression 'on a per share basis of pre-tax profit less tax' should suffice in eliminating double taxation. Any tax professional or legislator should be able to get their heads around that, as accuracy cannot be otherwise achieved. The Henry review report reported that all ordinary shares were taxed at 24 per cent, as mining companies were taxed at only 17 per cent, excluding royalties.

Each and every industry and area has its own challenges, which are adjusted through the act and its supplementary by-laws and practices. The 2006 introduction of lump sum single or staggered deposit contributions was not well thought out. A person with a spare $1 million or a couple of spare $2 million would never be in the position of qualifying for the age pension, as the asset test for a couple was probably around $400,000, so there was nothing in it for the government. The combined revenues of the Commonwealth states and territories is around $600 billion. It was reported recently in The Australian newspaper that the revenue forgone in subsidising the superannuation is four times the total aged-care budget—$200 billion, or one-third. This is disgusting.

Overdosing on tax deductible investment is, just as often as not, counterproductive, both for the individual taxpayer and government revenue. Such overutilisation should never be tolerated by government, but suddenly it has been through shabby association and vested interest, together with perceived electoral benefit. The federal opposition's recanting of esoterically created credits is only flawed in that it is turning the water off at the nozzle instead of the tap. Let those who claim to be adversely affected reflect upon the reality that they have been beneficiaries of an error for the past dozen years.

CHAIR: Thank you, Mr Hackett Jones. I'm sorry to interrupt—it's three minutes tops for everybody. It's Mr Peter Kerridge next, and then Greg Schmidt.

Mr Kerridge : My name is Peter Kerridge. I'm a self-funded retiree. In general, I will just say that I think welfare is a good thing as a safety net, but all my life I've endeavoured to not have to rely on welfare. There are some people who need to do that, but I really opted to be a self-funded retiree and have a self-managed super fund. I disagree with the proposed legislation or change because, firstly, it discriminates against those with self-managed super funds and, secondly, it only affects a portion of the population.

There is one thing that hasn't been explained to me by the accountants and others. At present, when we do our tax returns, we give our dividends and the franking credits have to go in as part of income, and then you get a rebate for the franking credits. Well, I haven't been told if we will still have to declare the franking as well as the income. I want to know because that's going to be double taxation.

The final point I'd mention is that I am really disappointed in a political sense. I think something as important as superannuation really should be bipartisan, and it's a pity that parties haven't been able to get together and agree on some common cause that can be justified economically.

Mr Schmidt : I speak as a tax agent and a fellow member of the society of CPAs. My issue with the proposed changes is essentially to do with the discriminatory nature as it targets the investment profile of a person. It targets those people who have invested in Australian companies essentially and have little other income. I don't believe that the amendments target pensioners particularly or self-managed retirees or self-managed superannuation funds; it targets those investors who have invested in Australian companies and have created capital for Australian companies, because it's those people who are primarily invested in Australian companies that get most of their income from dividends that have franking credits. And it's that particular microcosm that will be affected by these amendments. With these amendments you are targeting and penalising these people based on an investment decision. That is an odd, strange and unusual way to penalise and amend the taxation system. Those people who have invested in BHP, AMP and CSL are the guys who are being targeted. Those people who have got investments in housing, foreign companies or interest are not being taxed. I find that quite a discriminatory way to amend the taxation legislation. Thank you.

CHAIR: Thank you very much.

Mr Huckett : Both my wife and I went into the workforce at age 15. I joined the RAAF as an apprentice and my wife started a local general store. I spent nine years in the RAAF and my qualifications took me to the mining industry. Because of my trade I was a long-term member of the Electrical Trades Union. My last job was at a very remote mining company. I met my wife there. She worked at a local car dealership for 18 years before moving into the mining company. She attended university by correspondence, gaining qualifications which had her promoted to superintendent level. I started as a tradesman and was promoted to section head. My wife spent 34 years at this remote mining company and I was there for 24 years.

This is part of a letter I sent to Susan Lamb before the Longman by-election. I'm not going to read that—she didn't reply to it anyhow. But this is something I want to read, I wrote it up last night because I saw Mr Shorten on the 7.30 program a couple of nights ago. This is Bill Shorten's response to franking credit questions. On the ABC 7.30 program on 28 January 2019 the program showed Bill Shorten travelling by bus throughout Queensland on a pre-election talking tour. He was being interviewed by the journalist Laura Tingle. At one of his stopover presentations he was asked questions by a self-funded retiree who will lose 25 per cent of his retirement income if the Labor Party's franking credit policy is to become law, a situation similar to us. Shorten answered by saying something like, 'You have to look at the big picture. You can't allow people to receive money from the government without paying tax.' To us that is incorrect. When we were working in the accumulation phase every investment we made, including in the share market, was after we had paid full pay as you earn tax. All dividends from shares, including franking credits, were added to our salaried income and judged by the tax office accordingly. Also, any money we salary sacrificed was taxed at 15 per cent, as was the law at the time and still is I believe. Every investment we made was to fund our retirement and not be a burden on the government purse. We paid tax beforehand. What Bill Shorten is telling the electorate is not true. When we went into pension phase, we received our pension at zero per cent tax, and still do. This is no different to pensioners like several of our older siblings. The mandatory company superannuation laws and the salary sacrifice opportunities came in towards the end of their working lives. They didn't have the time to build a reasonable super fund. They worked all their lives as mechanics, nurses et cetera. They paid their taxes, and when they reached retirement age they were eligible for the age pension with many concessions. Like us, they received this at zero per cent tax.

CHAIR: Thank you. I apologise; we're at three minutes. You can, by the way, make a submission to the inquiry.

Mr Wells : Thank you, Chair and committee members. I'm 63 years of age. I joined the workforce in 1973 and had various jobs—labourer, delivery driver and ringbarker—before becoming a trainee lineman in the Postmaster-General's Department in 1974. Thirty-four years later I got my redundancy from Telstra and then I became a bus driver. My wife, when she finishes up this year, will have spent 42 years as a nurse. Neither of us, I think, qualify as the super wealthy rorting the taxation system.

Now, we didn't live entirely frugally through our lives, but neither did we waste our money. We didn't go out to dinner every second night. We didn't go on expensive holidays every year. We worked hard, saved diligently and raised a family. After the 1987 stock market crash, I thought, 'Here's a go,' so we started buying some shares in Australian blue-chip companies. It would help us get ahead and make for a comfortable retirement.

We never qualified for any government payments, and knew that our savings would preclude us from the age pension. The majority of my income today is my superannuation pension. When my wife retires in June, it will also be her main income. As these are tax exempt, our other income of dividends and bank interest will be just about where the tax threshold cuts in. Our combined $11,000 in franking credits will actually make up a significant part of our income to fund our lifestyle.

Taking these franking credits from our family and other self-funded retirees is unfair and discriminatory, especially when we structured our finances on well-understood and longstanding rules. Apart from negatively impacting many of my generation, I believe it will also discourage investment in Australian companies, with deleterious effects on the economy. This proposed change is discriminatory, poor economic policy and should never be enacted. Thank you.

Mr Thompson : Thank you, Mr Chairman and committee members. I've had a super fund since the late eighties—that's 30 years. Over that time, we have paid quite a bit of tax: 15 per cent on earnings and 15 per cent on deposits on the way through as well. The tax I was paying in the late eighties was around 70 per cent because of the superannuation surcharge levy. So, there's always some way they're going to get at you.

I've heard most of the discussion, and I totally agree with it. There are a few little things that I want to personalise. In our self-managed super fund last year, we earned $30,000 per member in franking credits—which is tax paid if we didn't get it back, which is what Labor is proposing—and another $20,000 in other tax, from capital gains tax, overseas tax and other things, which, as a non-taxpaying self-managed super fund in pension mode, we don't get back. We're in fact paying $20,000 in tax already. We will be paying another $30,000 tax per member if Labor gets in.

This notion that it's all tax free is a load of hogwash. Mr Keating set it up in such a way that you paid tax as you put money in and you paid tax as you earned in accumulation mode so you wouldn't have to pay tax in pension mode. And then Julia Gillard gets up and was trying to change the thing back in about 2012. She said that we are the fabulously wealthy, these people on self-managed super funds. So, from Keating to Gillard, things have changed.

A couple of other things haven't been mentioned here. We invest in things like Australian shares to get a steady income, a secure income. We don't care where the price goes that much, as long as we get our income and franking credits. We can't make money on bank interest—it's only 1½ per cent. We have to draw down five per cent and some people even more—up to 7½ per cent, I believe—mandatorily from the fund every year. If we are earning 1½ per cent, it will be all gone in 10 years—there will be nothing left—so we have to make investments in things that earn money, and that's why we are investing in dividends in Australia and that's why we're investing in other things offshore that might have a bit of a growth profile. What's going to happen is that, once the franking credits are disallowed, the Australian stock market is going to change dramatically. It'll start to reinvest money rather than giving out dividends. The dividend era will be over. What's going to happen is that we'll become like the American stock market. It's a speculative market and it's all about the growth of the share price and has nothing to do with dividends. So our whole market, our whole investment profile in this country, will be totally shot and we'll have to start thinking about things quite afresh. My time has expired. Thank you, Chairman.

CHAIR: Thank you, Mr Thompson. We have reached the 10.30 threshold, but we did start late so I will take the last three people who put down their names, to be comfortable. Bill Myers can come to the front. Ms Graving.

Ms Graving : Good morning. I'm an independent financial planner with around 30 years experience in that industry. Most of my clients are self-managed super fund trustees. These clients come mostly from a background of private enterprise—largely small business and farmers. My first point is that they are not the highflyers the Labor government alludes to—that they would be the only ones impacted by this proposal. They are genuinely hardworking, down-to-earth people with just enough in their super to make them self-funded. They understand what it takes to run a successful profitable business, keeping an eye on cash flow, expenses and overheads, buying power, selling a product and making a profit. They also recognise that, to do this successfully, they need the ability to track and understand every aspect of their business. Hence, having the same level of control, transparency and clarity with their superannuation is what brings them peace of mind and confidence and makes them good trustees. They run the self-managed super fund in the same way they run a business; the same principles apply. They are ultimately concerned that they do, in fact, have a higher cash flow than their expenses. They are concerned that their fund performs well relative to the risks they are taking.

My second point is that these trustees have taken responsibility for their futures and have run their funds in their best interests, not anyone else's. In contrast, this proposal will encourage poor culture and behaviour in industry funds. They can incur higher expenses to make them then eligible to receive the franking credits. This is a ludicrous situation. We all heard the issues unveiled in the financial services royal commission and now the Labor government wants to introduce a policy that will encourage and provide the opportunity for further conflicts of interest in the industry funds.

My third point is that the return of excess franking credits is a critical source of the income that these trustees rely on. It can contribute, as you've heard, five per cent to 30 per cent of their fund's income. This is income they can't afford to lose. Further, it won't be captured in the Centrelink testing because the super fund is deemed under the income test.

My fourth and final point is simply that the proposal is clearly the government wanting to double-dip on taxes for these self-managed super fund trustees—trustees who are responsible, independent, critical thinkers who have worked hard and are 100 per cent responsible for their financial future. It is clearly a push by a union-driven party to herd investors into their industry funds. How, as a collective, democratic nation, can we allow this? Thank you.

CHAIR: Thank you very much, Jayne. Next we have Bill Myers.

Mr Myers : I'm a retired engineer. Personally, I'm not going to be too severely impacted by this tax because I can offset most of the franking credits. But what annoys me is that when I studied Economics 101 at school the fundamental issue was that tax was levied according to the ability to pay. It upsets me when a person on $20,000 is denied franking credits, when yourselves, for example, on $200,000-plus, are pocketing this cash. Let's be straight about that. Why should you benefit and somebody on $20,000 not get it? When Paul Keating introduced the imputation credit his idea was to make it fair. Let's get fair about this, hey? I'd like to make an amendment to this bill. Why don't politicians forgo their franking credits? They could easily be put through in the tax system along with everybody else. Go ahead and pass this and make an amendment that politicians miss out on their franking credits. Let's be fair about it, hey? I think Pauline would support me anyway, even if you wouldn't vote for it.

CHAIR: Next is Mr Lyle Essley and then finally Rory McDougall.

Mr Essley : Good morning, Chair. My name is Lyle Essley. I retired in 2017 after I was pushed out of work because the company went bankrupt. I worked in the printing industry, and, as there was little opportunity to get jobs at my age, I chose to be a self-funded retiree so I wasn't taking Newstart et cetera. My fund is about $350,000. I get $35,000 a year in dividends and franking credits. It supports me and my teenage son. If I send him to trade college it's going to cost me $6,000 a year in tuition. I don't know how I'm going to pay that.

I think that the whole thing is really unfair because franking credits are an owner's assessable income. Franking credits are the property of the shareholder. Franking credits are not a concessional tax credit like the low-income tax offset. They are an earned tax credit. Franking credits are clearly the property of the shareholder. Also, in Australia you cannot take property off a person on unjust terms. It's absolutely unconstitutional. This proposal is unconstitutional because it's taking property—franking credits—off shareholders on unjust terms by not taxing them at their marginal tax rates. I think that that should be investigated. Thank you.

CHAIR: Thank you, Mr Essley. Finally, Rory McDougall.

Mr McDougall : I agree with just about everything everybody has already said. I'd just like to say that, yes, I have a self-managed super fund and, yes, I will be well over the limit, but I am so, so disgusted with this proposal because I worked so hard to get there. I've got to say my reaction will be and is vitriolic. I've already booked a 35-grand trip to the UK and I've already made plans for a big renovation on my house! I'd just like to remind you blokes about Kevin 07's mining tax and how well he did out of that silly proposal. So I really think you guys have got to go back to the drawing board and sort something else out. Oh, and all those poor cafe owners and clubs and everything that rely on all the money we spend every morning and afternoon are going to feel the brunt of it. It won't really beat me, so go and think again. That's all I've got to say.

CHAIR: Thank you, Mr McDougall. That brings the public statements to an end. Firstly, can I apologise again about the issues around sound at the beginning. We got there in the end, and thank you particularly to Mr Wallace for assisting with that as well, as the sound technician. This is a unique public hearing process. Ordinarily we don't go out to the public and ask for their views and do a roaming parliamentary hearing. It sometimes happens, but it's pretty rare. We made the conscious decision to do it with this committee because this issue directly impacts on many people. This morning the shadow Treasurer Chris Bowen called this hearing an abuse of process. I was just wondering: does anybody agree with that? No. Right. I tend to think it's good that you have the right to be heard.

Thank you for your attendance here today. Please note that written submissions will continue to be accepted throughout the inquiry. As part of the conclusion to the inquiry, if anybody would like to have their views or opinions recorded by the media you can go out into the right-hand side near the bar area. I declare this public hearing closed. Thank you very much.

Resolved that these proceedings be published.

Committee adjourned at 10:40