Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Standing Committee on Economics
Implications of removing refundable franking credits

BROWN, Mr Robert, Private capacity

CRONIN, Ms Lyndall, Private capacity

DESOUZA, Mr Caji, Private capacity

DOYLE, Mr Brian, Private capacity

DUNN, Mr Laurence, Private capacity

FARRALL, Mr Frank, Private capacity

GOLDING, Mr Gary, Private capacity

HENRY, Ms Karla, Private capacity

KALKMAN, Mr Jon, Private capacity

KALKMAN, Ms Margot, Private capacity

KING, Mr Ron, Private capacity

LOVELL, Mr Rodney, Private capacity

MACKINLAY, Mr Peter, Private capacity

MACKINTOSH, Mr Mark, Private capacity

MITCHELL, Mr Ian, Private capacity

MURPHY, Mr Michael, Private capacity

PAULL, Ms Margaret, Private capacity

READ, Ms Dianne, Private capacity

SMITHARD, Mr Peter, Private capacity

TRINDALL, Mr Arthur, Private capacity

WATSON, Mr Vince, Private capacity

WILSON, Mr Daryl, Private capacity

Committee met at 09:01

CHAIR ( Mr Tim Wilson ): I 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 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. This committee is examining how the removal of refundable franking credits will affect investors, in particular older Australians who have planned for their retirement based on the existing rules and whose financial security could be compromised. Estimates put the number of people affected in Queensland at around 165,000.

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 welcome your contributions and participation. If you would like to speak today, please add your name to the clipboard to register. Before commencing, I refer members of the media present—and there is at least one person—or who may be monitoring this hearing via the internet—hello to you—to the need to fairly and accurately report the proceedings of this committee.

The way this committee hearing will work is I will introduce each speaker and invite them to speak into the microphone provided. The secretariat—that's John—will indicate to you with a green sign when you have spoken for three minutes. I will then introduce the next speaker. Please note that the statements are broadcast and recorded for the public record. I ask that speakers refrain from adversely commenting on other people and exercise caution when speaking about their own or other people's private or financial circumstances. Basically, if you say something into the microphone, it's going to go into Hansard and go on the public record forever.

Please be aware that these proceedings are being filmed and may be by others. If members of the public have objections to being filmed, please raise them with the secretariat—John again—and the committee will consider your request.

I have a sheet of people who wish to speak for three minutes. Depending on the number of people who register, we may tighten the three minutes or give slightly greater latitude. At this point, depending on how many are on the other sheet, we will probably be reasonably generous with our time. We will start with Margaret Paull.

Ms Paull : Thank you for the opportunity to present my statement here today. My husband and I are both in our 70s and we're self-funded retirees. I belong to that era when females had to resign from the workplace when they married. I subsequently had to resign again when I had a family, and there was no subsidised child care. So, for most of my life, I've had intermittent and casual work with no access to superannuation. As a state government employee my husband had superannuation. Now, to compensate for my lack of financial security, I have as an individual investor slowly accumulated, over many years, a share portfolio of Australian shares to support our needs in old age. As these shares are not held in a self-managed super fund, they are subject to tax and also capital gains tax. We will have to sell them to support our move to aged care.

My annual income is so low that I do not pay tax on my dividends, and I receive the full franking credit as a cash refund. In fact, my grossed-up income from that shareholding is equivalent to an age pension. The cash refund we get is budgeted to cover our hospital health insurance, out-of-pocket medical expenses, and car maintenance and running costs. My husband is 78 years old and is in remission from cancer, and has recently developed heart issues. So those out-of-pocket health expenses are now running in the thousands. If we lose a third of my income, which will be approximately $6,000 a year, under Labor's proposal to deny cash rebates for franking credits to low-income and retired shareholders—which I am—we'll have to seriously consider giving up hospital health insurance, and use public health and hospital services for our ongoing and intensive support. Additionally, as the family driver and the carer, my ability to maintain a reliable and fully maintained vehicle is compromised. In city traffic, this poses a risk not only to me and my family but to other road users.

Throughout our married life we have strived to be self-sufficient and to not structure our finances to facilitate welfare handouts in our old age or be a burden on our three sons and our extended family. It is extremely disappointing to realise that a married couple on a minimum age pension or a welfare payment on 28 March 2018 would have received a full cash refund, while we get not one cent. Thank you.

CHAIR: Can I ask a clarifying question—if you're happy to answer it.

Ms Paull : Yes.

CHAIR: You said you hold the shares outside of superannuation. So you're saying you don't pay a tax liability because you're under the tax-free threshold. Is that correct?

Ms Paull : Yes.

CHAIR: Okay. Next up we have Robert Brown.

Mr Brown : My wife and I attended yesterday's meeting at Bardon, and I was greatly impressed by the courtesy and good humour with which you conducted that meeting. So, on behalf of all here present, I'd like to thank you and the committee for the valuable public service that you're doing.

CHAIR: That's very kind, thank you.

Mr Brown : Anyhow, back to business. I'm 67. I'm still working part time. I'm trustee of our family self-managed superannuation fund. My wife retired two years ago because of ill health. She was a nurse. She has investments in Australian shares which provide a grossed up income of around $20,000. Neither of us receives any government benefits.

The guts of my submission is that to oppose dividend policy is based on lies, jealousy and a total disregard for a fair go. It assumes that those of us who've made sacrifices and lived a frugal life to save for our retirement are somehow undeserving of the fruits of our sacrifices. I'd like to make four points in support of that.

First, the Labor Party, as justification for making franking credits not refundable, has bandied around claims that there are self-managed funds that receive refunds in excess of $2½ million. This is ludicrous. Do the maths. Super funds are taxed at 15 per cent. Dividends are franked at 30 per cent. If you're assuming 80 per cent of assets in assets yielding fully franked dividends, with the remainder of dividends yielding seven per cent gross and the remainder in bonds, deposits or whatever, yielding around $2,000, which is about the current returns, the fund would need $321 million in assets to deliver that sort of refund. I defy the Labor Party to produce one such fund, much less a bunch of them.

Second, to deny retirees the benefit of franking credits is to tax them like they were millionaires. My wife's share portfolio generates a gross income of around $20,000, of which $14,000 comes directly to her and the remaining withholding tax—because that's what franking credits are; they're a withholding tax—of $6,000 has to be reclaimed from the government. If she's denied that $6,000, she'll be taxed as if she had a taxable income of $50,000, except that the person with $50,000 in non-dividend income gets to keep $43,900, whereas my wife keeps only $14,000 despite paying the same tax at $6,000.

These are not hard calculations. You go to the ATO's website and do them. If you raise it to $30,000 in dividend income, you'll pay $9,000 in tax, which is the same tax as an ordinary taxpayer with $55,000 income, but the investor keeps only $21,000, and the ordinary taxpayer keeps $46,000. That is, it is the same tax bill, but the investor's after-tax income is over $25,000 lower. You can keep raising the dividend income. The gap persists.

Third, and this is the really insidious part, this policy is aimed squarely at destroying self-managed superannuation funds by manipulating the tax to make them uncompetitive with funds at the big end of town—I'm about 100 words from the end.

CHAIR: I'm sorry, Mr Brown. I have to be fair to everybody. We've given you more than enough time. Apologies. Next, Lyndell Cronin. Then, after that, Ian and Elisa Mitchell.

Ms Cronin : Good morning, panel. I'm from the Gold Coast. I'm not here this morning to apologise for what money we may have saved by working long and hard hours over many, many years, for bringing up four sons, who are very successful in their own right, or for never being a burden on the taxpayer at any stage. We have not had funds contributed by the taxpayer into our superannuation funds over the years, and all of a sudden we are being told that we no longer have the right to invest our funds where we choose. We are no longer allowed to decide where we put our funds.

Now, I may be very happy to change my funds. Ours is a self-managed super fund. I could be very happy to contribute my funds to a very generous superannuation system such as the politicians enjoy, with numerous contributions from the taxpayer, and also they're not reliant on the returns from the volatility of the stock market like everybody else out there in the community. They have a guaranteed return on their super funds, and that continues on not only to them but also to their families. But let's not go too far down that line.

We've also been told recently by a very prominent politician that we are overinvested in Australian shares. Now, what sort of message is that giving on our confidence in our Australian economy? Here we have the best country in the world, and what are our politicians telling us? 'Don't invest in Australian shares.' Well, I disagree with that totally. I have every confidence in our Australian economy, and I think it's very important that we keep it very strong and moving forward. Wealth creates wealth; poverty creates poverty.

I am here today to request the right, as any other citizen has, to put my money and to invest my money where I choose. We're just having a banking royal commission at the moment into the vagaries that have happened within the financial system, and here we are being forced into putting our money into managed funds. Basically, that's what's happening. The elephant in the room is—I hate to tell all the retirees out there who have their money in invested funds, in managed funds—that their franking credits are harvested, euphemistically termed, to pay the taxes that are incurred within the fund from other fund members.

That's my objection. I would think that it's almost illegal to be legislating that people within our community are treated differently from everybody else in the community. There you are. Thank you.

CHAIR: Thank you, Ms Cronin. Next I have Ian and Elisa Mitchell, then after that Peter Smithard, I think.

Mr Mitchell : Good morning. I represent myself and my wife, Elisa. I'm 67, 68, going on 70. I retired approximately three or four years ago. I started my superannuation fund when I was 22 or 23 on the advice of my father and my employer at that time. Every organisation that I've worked for since that time has had a super fund with a defined benefit, which was converted to accumulation as legislation changed through the years. We looked always to support ourselves. My father was a Second World War veteran, as was my mother. They both suggested to me: 'Always look to the future and always look to yourself. Do not ever rely on a government to look after you.' I've taken that on board.

For the last 20-odd years, we've worked on the basis that franking credits would be able to be claimed as a rebate through the system. That system at the moment provides approximately 20 per cent of our income. We do not have the $1.6 million cap. The two of us together are well under that cap. So we don't have the $2½ million franking credits that I think have been bandied around. I find it interesting that that number is still quoted, yet there's a cap on superannuation of $1.6 million, which is all you can hold, and that's all you can claim in terms of franking credits.

For me, I think the conversation that's gone on for the last year or so is dishonest. I think it was the epitome of arrogance the other day—a certain politician suggesting, 'If you don't like it, just vote for someone else.' There really is no thought about what Australians want for their life and what they set about in preparing for their future. We have never been the beneficiaries of the baby bonus. We raised two children; we still have one at home who we support. We've never been on welfare. We pay for our hospital and medical, and the out-of-pocket expenses are just starting to increase on that. So I can see that, for us, over the next 10 to 15 years, if that 20 per cent income disappears then we are going to become a burden on the Australian taxpayer. It's not something that I wanted to do, nor did we ever choose to head down that path.

I'd like it to be taken into account that people such as me have never looked to the government for welfare, have never looked for support and have always looked to support ourselves.

CHAIR: Thank you, Mr Mitchell. Peter Smithard, followed by Michael Murphy.

Mr Smithard : I thank you for this opportunity. In January 2016 I became a self-funded retiree after in excess of 40 years in the workforce, having accumulated a superannuation asset which I calculated would provide a reasonable retirement ability, albeit with significantly less cash flow, and with clear ownership of our home. This calculation was based on my knowledge of the superannuation at the time and the supporting legislation, which included franking credit imputations—refunds. My wife followed suit in October 2016 and commenced drawing on her super, managed by Sunsuper.

During my years of work, I conservatively suggest that my contribution to the government by way of income taxes well exceeded $1 million, and my retirement plan has been to have no dependence on the government pension, both now and in the future. Although I do not pay income tax, as a self-funded retiree in pension mode, I pay 10 per cent on 95 per cent of purchases through GST. With purchasing power now proposed to be cut by 30 per cent, so will this passive income to the government.

We are not rich but have worked hard, like all in this room. We have a relatively comfortable life, having ownership of our home. There are no new cars in our driveway, and our last trip abroad was in 2015. I must say that my superannuation fund is well under the threshold cap.

Both sides of politics have spoken the rhetoric of the Australian adage of a fair go, an adage which underpins my values and to which I have strived to use my capabilities to secure a future without burden on the economy of the Commonwealth, using the established rules in place at the time of decision-making to retire, regarding my wife's and my future. Accordingly, my self-funded retirement strategy was in the main dependent on investing in Australian blue-chip stocks, where approximately 30 per cent of our income would be derived from the dividend imputation system.

In short, should the changes Labor has proposed to level at self-funded retirees be installed, our relatively modest income would be cut by 30 per cent. Bill Shorten's Labor Party rant on this subject. The plan goes further and insidiously refers to 'the big end of town', but without definition. I suspect both he and his wife may meet any entry-level criteria that may correspond to his 'big end of town' rhetoric, and both he and his wife would enjoy far in excess of what personal assets or potential I can speak of. To this end I say good luck to them, consistent with my values, underpinned by my fair-go values.

Short and straight: the outlined-in-the-sand approach in respect of self-funded retirees begs a number of questions for me. He wants to destroy the self-funded system. He wants people to funnel into industry funds directed by the union movement. He talks of the saved government expense of not reimbursing imputation credits as a means of building new hospitals and schools. As I understand it, these are state based and funded and should be funded by the GST distribution. My options going forward are getting a job, hopefully a part-time job; and closing down my super fund, putting in a tax return and getting back credits.

CHAIR: I'm sorry. We're at the end of your statement. Thank you very much. Next up is Mike Murphy.

Mr Murphy : I am a self-funded retiree. I've been retired about seven years now, and I retired with rules in place at that time. I made the decision to retire at that time based on the rules that applied at that time, and it irks me greatly that those rules have changed a number of times over that period. This is the latest proposal being put forward that will cut quite dramatically into the ongoing income that I will receive from my fund. Suppose this sort of proposal were going to apply to all other taxpayers—for instance, that, if you were entitled to a tax refund, you're not going to get and we will just hold onto it. That's exactly what this proposal is designed to do, and it applies only to a certain group of people. All those who are in industry funds or in managed funds are exempt from it. It's just people who have decided to manage their own retirement who are going to be sadly affected.

I will just give one example of what would happen. If you work for six months and your income is, say, $18,000 over that six months, you would have been taxed as if you were earning $36,000, so you would have been sending money to the taxman. Then, at the end of the year, because you'd only worked six months, you'd be entitled to a refund of the additional tax that you would have had to pay. That's exactly what is happening. It is exactly the situation with self-managed funds. People are below the tax-free threshold and so are entitled to a tax refund. If the government proposed that those people who had worked for six months weren't going to be entitled to a refund of the excess tax that they had paid, there would be a riot, yet self-managed retirees are going to be subject to that sort of imposition. I think it's quite objectionable.

We have a great deal of uncertainty about what the future holds for us, but it's particularly dangerous when it becomes apparent that there is now uncertainty about the past. I think that anybody who is proposing these sorts of things ought to consider that. It particularly applies to people who are in much less of a position to be able to adjust their future earnings because of their age, their infirmity and all those sorts of things. These sorts of changes and adjustments to rules that applied when they made significant decisions in relation to their retirement are being foisted upon them. Thank you for listening to my statement.

CHAIR: Thanks, Mr Murphy. Next we have Arthur Trindall and then Arthur Simpson.

Mr Trindall : Hello. I just want to talk about general business principles, because we're talking about the biggest business in Australia, the government. In principles, we set out ourselves to come up with something strong to provide for ourselves in the long term. As a self-funded retiree, I didn't want to be a burden on that government. I wanted them to provide the services that the community needs. So I set about that and became a self-funded retiree. I, within the rules and legislation, set it up. I'm now in the drawdown or pension phase, and we're changing. I've never seen a business that brings in a retrospective change survive.

I don't think the government would accept it if we decided to not pay our full tax because we decided we didn't need to pay it, but yet the government are doing that. If the government make a change to tax, they normally give a lead-in time of two to three years, hence we've got one coming up that was promulgated a couple of years ago. Therefore, the government sees that they need to run their business, that is the government, professionally, yet they're taking us and treating us unprofessionally by taking this money out that we satisfied we provided for ourselves. You can only talk about general principle. I don't want to go into the nuts and bolts of it, but that's wrong, and anybody who doesn't run a business or a government by principle has to be failed. That's all I have to say.

CHAIR: Thank you, Mr Trindall. I call Daryl Wilson, and what a fine, upstanding surname it is, sir! After Mr Wilson, we will hear from Mark Mackintosh.

Mr Wilson : Good morning. My name's Daryl Wilson. I'm a self-funded retiree. If this legislation goes through, I'll lose approximately a third of my retirement income, which is not a lot, I'll tell you, and I'll probably be on a pension within two or three years. I'd like to bring up the other elephant in the room that someone raised earlier—the industry super funds. This is just another insidious means of crippling self-funded retirees or self-managed super funds, and it's created a river of gold for the Labor Party. You need to cut the head off that snake, because that's crippling fundraising for the Liberal and National parties and it's giving so much money to activist groups like GetUp! and other extreme left-wing organisations, and it's making it extremely difficult for us to get a balanced, proper government in Australia. Democracy is almost dead in Australia, the way things are going. We're being governed by minorities, not by people who are like us—who have worked bloody hard all their lives, have saved for their retirement, are self-funded and are not a burden on the government. Thank you, gentlemen. That's all I wanted to say.

CHAIR: I call Mr Mackintosh and then Dianne Read.

Mr Mackintosh : Good morning, my name is Mark MacIntosh. We are told that the refund of franking credits is wrong because those receiving the refunds have not paid any tax. This is one of the highlights of the campaign. Yes, we have paid tax. We've paid tax via the dividend imputation system, and, as previous speakers have mentioned, it's our money—it's money that's been withheld on our behalf to be applied to any tax payable.

We need to publicise this issue because we need people to go to the next election with a considered opinion. My big concern is that the vast majority of voters are of an age where this is not particularly affecting them at the moment. It will in the future, but it's out of mind and not at the top of their head when they come to vote. I'm sure that all the people in the room here, as you can see, are over the age of 50. They need to be explaining this to their children and friends. If they're anything like me, they probably have found that it's sometimes quite difficult to explain to somebody how the dividend imputation system works.

I'd like to, if I may, give you a quick demonstration of what I showed to the shadow minister for finance, Dr Jim Chalmers, when I went to his office some six months ago and put this before him. He agreed with what I said, and, to me, it makes a lot of sense, so if I may indulge you for a second. We've got three different things we can invest in: term deposits and bonds, being the interest; a rental property so we get our rent and capital gain, hopefully, on the sale; or the share market—dividends. Let's assume we've got $100,000 invested in a term deposit and we're going to receive interest on that of, let's say, $2,000. We've got a $100,000 unit returning two per cent. We get $2,000 return on that. And then the dividends: we receive $2,000, being two per cent of the $100,000 invested. However, $600 is held to one side whilst we prepare our tax returns. At the end of the year, we will find that we still have our $2,000 from interest, we still have the $2,000 from rent but we only have $1,400 from the dividends. What I'm trying to say is that's probably an easy way for the general populace to explain to those who aren't aware of what's going on with the changes proposed to the dividend imputation system.

CHAIR: Thank you, Mr Macintosh. Next is Dianne Read.

Ms Read : Good morning, everyone. I'm going to talk about a general principle, as did a fellow person before me. I'm going to go to a quote: 'If you don't paddle your own canoe, you don't move.' I've been diligently paddling my canoe for more than 30 years. I haven't stopped to get assistance from other people in paddling that canoe. Every three or four years, a large ship liner comes alongside me and tells me, 'You need to change the construction of your canoe—downgrade it—or the way that you've been navigating and the rules and directions that you've been taking are now closed off to you.' In case you're not quite sure about the analogy, the big ship liner is the government, because of course their vessel has entirely different rules to my vessel. The vessels of politicians—their superannuation and their income in the structures—have quite different rules than what I have to follow. My general principle is to ask all of you—Mr Kelly, Mr Thistlethwaite, Mr Wilson and Mr Evans—to simply work ethically and do the right thing. These proposed changes are wrong. Particularly for Mr Thistlethwaite and Mr Evans, I'm directly asking you: do the right thing, even though I realise you have a challenge on your hands in terms of convincing others in your party that this is wrong. Thank you very much.

CHAIR: Thank you very much, Ms Read. For clarity, there are three members of the Liberal Party here: Mr Evans, Mr Wilson and Mr Kelly. There is one member of the Labor Party here, Mr Thistlethwaite.

Ms Read : My apologies.

CHAIR: That's all right. I'm not somebody who's obsessive about this; I just note that a number of people have made remarks about the superannuation of people who sit on this side of the table versus what is experienced by everybody else. In 2004 the parliamentary pension scheme was abolished for any new elected member of parliament. I'm pretty sure all of those on this table are bound by the same rules as you are, so we're talking about an issue that affects us as well as you. Anyone who was elected before 2004 is under a different system. It doesn't bother us—we're used to it—but there's a gross misunderstanding in the community thinking we still have our old defined benefit scheme. That's by the by. Next is Mr Brian Doyle.

Mr Doyle : I'm a retired commercial cartoonist and, like everybody here, a very soft target for Mr Shorten's and Mr Bowen's discriminatory franking credits tax grab. I drew a cartoon for Alliance for a Fairer Retirement System after meeting with John Maroney. It highlights the ALP's intention to destroy small business superannuation plans. Also, I'd like to briefly quote just a few lines from Robert Gottliebsen and Terry McCrann's articles on franking credits in last weekend's financial section of The Australian. Both confirm my belief that the franking credits grab constitutes blatant discrimination against older people. I'll conclude with a relevant cartoon that John will soon post on the alliance's website. This is a quote from Gottliebsen:

… there are longstanding retirement rules under which people arrange their future when they cease working, there should be extensive grandfathering when fundamental changes are proposed … but I can't recall any group of politicians being so ruthless in their treatment of battling retirees and grandparents as Bill Shorten's ALP.

And another quote:

Bill Shorten and Chris Bowen declared that if you had no taxable income but saved your money through an industry—

read 'union-controlled'—

or certain retail funds then you would receive your cash refund entitlement "in full"—

and he repeats the 'in full'—

By contrast, if you are in exactly the same financial situation, again with no taxable income, but saved outside of superannuation or saved via some retail funds or most self-managed funds, then you would not receive a cent of your cash refund entitlement—

And he repeats: 'not a cent'—

There are more than a million Australians being discriminated against this way…

Then—and this is the last quote from him:

We are going to be stuck with a precedent—

And we know how lawyers and politicians love precedents—

that promotes taxation discrimination. Who knows what politicians—

from that side, not your side—

will do next time.

Terry McCrann describes Bowen's commitment as:

… cringingly embarrassing incompetence on the part of the man who is about to get his hands on the fiscal levers, as his great hero—

Paul Keating—

used to put it.

He summarises with the comment:

… what Bowen is proposing … sits somewhere between inept and disastrous.

If Labor's selectively aimed franking credits tax grab, slammed by two of our most highly respected financial writers, doesn't constitute blatant discrimination against easy targets—elderly, retired, self-sufficient Australians—whatever does?

I've drawn another cartoon depicting a self-managed-super-funded lady asking in sheer frustration: 'Where's the Human Rights Commission when we need it?' Then I logged onto the Human Rights Commission website to see if self-funded retirees could lodge discrimination complaints, and guess what? Under the heading 'What is age discrimination?' is a cop-out clause exempting complaints 'in compliance with Commonwealth laws, including laws about taxation'. What a surprise! However, I found no mention of discrimination exemptions for proposed laws, as should be the case. If ever the commission was needed to actually prevent age discrimination, the time to act is now, before laws are enacted not afterwards—and a May election, as you all know, is fast approaching. Can you imagine the priceless, free publicity a tidal wave of official complaints to the commission would generate from every self-funded retiree, or, better yet, the millions of Aussies sure to be financially damaged by this direct, targeted attack on their retirement plans, and all the more so with the flood of tongue-in-cheek but challenging cartoons that they couldn't possibly ignore? Even the ABC would find that hard to ignore, but I'm sure they'd manage!

CHAIR: Mr Doyle, we're at the end of your three minutes, comfortably. The other thing is: are you asking us to submit these as exhibitions?

Mr Doyle : I'd love you too, if you wouldn't mind.

CHAIR: Thank you very much. Next Mr Jon Kalkman and then Margot Kalkman.

Mr Kalkman : Hello. Thank you for the opportunity. I'm a self-funded retiree who has been running my own self-managed super fund for more than 10 years. What I want to talk about is: everyone says that this is a retirement tax, but it affects a whole lot of people that don't seem to be aware of it. I'll give you an example. If I was a home-based spouse who had all the investments in my name and I had $21,000 in dividends, my taxable income is $30,000. Now, politicians run scared when we talk about taxable income, because that's what happens after you've taken your deductions off. But I'm not talking about deductions; I'm talking about a taxable income of $30,000. If I was a PAYG taxpayer, my tax on that $30,000, ignoring offsets, is about $2,200. Under the existing system the tax credit is also taxable income. The $9,000 is taxable income as well as a tax credit because it's been sitting with the tax office. So, if I'm a home-based spouse with $21,000 in dividends, my taxable income is $30,000. If I was a PAYG person I'd be paying $2,200 on that. If I'm running it on dividends, I'm entitled to a $9,000 refund because of the imputation credits, so I'm entitled to a refund of $6,800. The point is that the imputation credit is additional taxable income.

Let's talk about a self-managed super fund. If I have $35,000 in dividends, my taxable income is $50,000. If I'm in pension phase, my tax rate is zero. People don't seem to realise that this had nothing to do with Costello. This had nothing to do with the changes in 2001. It had everything to do with Keating's introduction of superannuation in 1992, when pension funds were taxed at zero and accumulation funds were taxed at 15 per cent. It's when you put the two together—imputation credits and pension funds—that you get the situation where, if my taxable income is $50,000 and my tax rate is zero, then my after-tax should be $50,000. Under this proposal, my after-tax will be $35,000 because I will lose the $15,000 tax credit which is also part of my taxable income.

There is a whole lot of confusion about people who don't pay tax. In my situation I don't own the shares. My fund owns the shares and my fund doesn't pay tax. What I take out of that fund depends on my age, my minimum pension, all sorts of other things. But the entity that is not paying any tax is the super fund in pension phase, and that was introduced by Mr Paul Keating, not Mr Costello. So it's important for people to realise that this is not just a tax credit which you may or may not get back; it's actually additional income which becomes taxable. I don't think that's well understood.

I am a director of the Australian Investors Association and I was the author of our submission, which I think is No. 433 on your website. I've gone into much more detail than I can here, but it really is worth trying to get your head around who the taxpayer is and how much tax we are talking about and why it is the way it is. Everyone says, 'Costello was at fault because he made it tax-free after 60.' The other point I make in my submission is that he never got much tax from people in retirement anyway. That's why it was so easy to do. He made a virtue out of what was no cost at all but great politically, and now everyone says, 'Let's go back to what Costello did.' If we went back to the situation that we had before Costello changed it, we'd collect less tax than we do now by making people with more than $1.6 million be forced back into accumulation.

CHAIR: Thank you.

Ms Kalkman : Good morning. I am 67 years old and I am a self-funded retiree. In this position I have recently been gutted by this proposed policy by the Labor Party because it will mean that my husband and I will suffer a 30 per cent decline in our income. We have managed to put together a portfolio of shares invested in Australian companies because that's what we wanted to do—we wanted to support Australian companies, Australian businesses and Australian jobs. We also made it a point of pride that we would not be relying on the government to support us in our old age. We need that extra 30 per cent of income to make that sustainable, otherwise we are going to be having to put our hands out to the government.

I never, ever expected, in this day and age when there is so much discussion about fairness, that a proposed government would change the rules once we'd started playing. Try doing that in a football match. It's just not right. We made these plans on the basis of what was law, what was legislated. To now pull the rug out from under us and a million other people who are not in a position to rebuild their finances, to go and get a job, is grossly unfair. To say that we don't pay tax is also grossly misleading, because the only way that we have managed to do what we've done is to save extra along the way and put that into superannuation. It was called salary sacrifice, and the word 'sacrifice' is there for a reason, because you give up consumption in order to do it. We did it because we could see that, with the baby-boomer generation coming through, the government wouldn't be able to afford our pensions. So we did something to make sure that we would be able to pay for ourselves.

If this goes through, we won't be able to continue doing that. We are not fantastically wealthy. Between the pair of us, we don't have as much as an individual taxpayer is allowed to have. But we've always lived prudently and we still do. If we continue to do that, under the current system, we should be able to fund our own health care and our own move into a retirement village or aged care, when that happens. We are proud of that, and I would've thought justifiably so. How can a government now say: 'Okay, you worked hard. Ha-ha! We've got you. We're going to take that away from you now because we want it'? It's not on, and I'm so angry about this that, if I keep talking, I'm going to splutter. You can't do this!

CHAIR: We dissuade people from spluttering. I do understand that it's an issue that brings about strong passions.

Mr Mackinlay : My wife, Marie, and I are retired. I just want to say that I've worked all my life in the construction industry. We've had our own business. I've been a member of the unions and various other things. I've been retired 12 years and I find it really difficult what the Labor party is doing to us. We earn about $40,000 a year. We will probably lose about $9,000. I've heard and read all the arguments, and I find it grossly unfair. The industry funds can get it, the other funds can get it, the people who are in retirement mode can get the franking credits to offset their tax and the people in self-managed super funds with huge tax bill can use the franking credits to offset their tax. And yet here we are, going through life—we've helped our children, our three sons, and all our grandchildren. We've got to a situation now where we're really enjoying life, and they want to take it off us. In my opinion it is grossly unfair.

They're running around and saying, 'We believe in fairness.' It's not fair! And I don't know what we can do about it. I think they should either grandfather it or put a cap on it—say $15,000 or something and after that you pay it. But I retired 12 years ago with all the facts in front of me, and now they're taking it off us. They've changed it, and it's not fair. If they grandfathered it or put a certain cap on it, all right; you've got to take it. But you've got this group of people, like all these people here, who are being treated unfairly. It's discriminating. Regardless of what they say, it's discrimination against hardworking Australians. I can't say anymore. That's all I can say.

Mr Watson : I'm 81 years of age. I'm slowing down, but I've still got my marbles. I am president of the Association of Independent Retirees, Brisbane South. I know what our members—and there are probably a dozen of them here today—are going through with their thoughts on what's going on. I will go through my list. I've brought copies, which I'll give to each of you gentlemen. First of all, at present any excess franking credits are by law refundable. The proposal amounts to double-taxation and would possibly be illegal. There are things out there—this could be taken to the Supreme Court.

Living longer: it is a fact of life that we are living longer, perhaps 15 to 20 years longer than our parents. For one of the most important considerations in retirement—our health—we have provided funds to cover rising medical and aged care in our own home or a nursing home. Cancellation of excess franking credits will place severe pressure on our well provided nest eggs.

If I may digress a little bit—personally, I've lost two wives in the last seven years. My first wife I nursed at home for about eight years, with home assistance. She was put into a nursing home and she had 10 years there. I visited her everyday of my life while she was there. To get her in there, they wanted $400,000, but I knocked them down to $300,000. To get into the same home at present, you're looking at half a million plus. What's going to happen to the nest eggs? The cost of keeping her in a home for 10 years was in excess of half a million dollars. I was paying 50 grand a year. At that stage, for medical expenses and nursing home expenses, we were allowed a rebate of 20 per cent over the first $2,000. That's been taken away. Where's that money gone? We are in a situation where at least the present government is letting a bit more money go, but it's nigh impossible. There are over 120,000 people on a waiting list to get into a home in Australia.

Death duties: why are self-funded retirees the only Australian citizens hit with death duties if their estate is left to non-dependent beneficiaries such as their children? At present they have to pay 15 per cent plus, a great reward for those who have loved and nursed their parents through the last 20 years of their lives!

Computer costs: costs spent in assessing taxable income for self-funded retirees are allowable in one's own name. In the year 2019, you cannot deal with investments without a computer, but self-managed super funds are not allowed to claim any. If that's not picking on the poor old self-funded retirees, I'll walk from here to Bourke!

Bank bashing: I'm not saying the banks are buying us, but the majority of super funds have invested in the big four banks to the extent of 60 per cent of their assets. The funds, with some reason, have fallen 15 to 20 per cent. These funds have taken up 20 per cent of their assets; they've lost it. The Commonwealth was below $71 yesterday—

CHAIR: I'm sorry, Mr Watson. We're at the end of your testimony. We've run out of time.

Mr Watson : We don't have time?

CHAIR: We've run out of time. We've given you four and a half minutes.

Mr Watson : But I've got more here.

CHAIR: You're welcome to table that statement if you wish.

Mr Watson : I'd like you to accept a copy.

CHAIR: Sure, we're happy to do that. Thank you very much, Mr Watson, and I'm sorry for your loss.

Mr King : I note that this is a joint committee of Liberal and Labor here. My main purpose here is for Australian citizens, including myself, but things are getting hard for the seniors in Australia. In January 2015 the legislation was changed and super funds were grandfathered. I'm still trying to work out what benefit we got out of that grandfathering. At the present time I'm getting charged 7.8 per cent on my asset taper rate. Everything just went on with what everybody else was getting, so it's a while since I got it, but if you want to ask me a question about that I'm quite happy to answer it.

I'm 84, nearly 85, so I'm still going along. I've got about $750,000 paid into super. It came from my savings after tax; it came from my salary sacrifice, where I didn't pay tax on it; and a super fund that started in 1992. I retired in 2001. I worked pretty hard to get there. At the present time, on my pension I've got a 7.8 per cent asset taper rate. Now, can anyone tell me why the taper rate comes off my pension? You can have $300,000 in assets and then you get about $32,000 on the pension. So a normal person coming in, who's got $375,000, has a pension of about $42,000 a year. But, because of this taper rate, which comes off that, my pension cuts out at about $750,000 or $800,000. Therefore they get $420 by having $350,000 in assets and also a pension of $32,000 a year. Me: the taper rate knocked me out. I have about $850,000. I get no pension, and on $850,000 I'm lucky to get $24,000. So those people are better off than me by about $15,000 or $16,000.

I might try and make that clear so you know what I'm coming at. With assets that cut off at $850,000—and I get about three per cent on the money if I'm lucky—that's about $24,000. I believe the requirement now to have a decent retirement, the medium level, is about $40,000 and the comfortable rate is $60,000. Before, I said about the taper rate that it's now 7.8 per cent. It was 3.9 per cent before that. Before that, I think, $83,400 was 1.75 per cent and over $83,400 was 3.25 per cent. I'm making out that what I'm paying now is much more, even though I'm supposed to have had my super fund grandfathered.

I agree with what's been said here by a lot of people. Negative gearing: we tried that before, a number of years ago. I remember we tried it and it didn't work. No-one started buying buildings or houses. So, if you're going to carry on that way, okay. Then you've got your imputation tax, franking credits. That's been allowed for a long time, so there must be a reason why you want to change that. Would anybody like to ask me any questions like that? I've probably had my three minutes.

CHAIR: You have, but we're trying to be respectful of the amount of time. Thank you very much, Mr King. Unless any member has any—

Mr King : I think this is something that's got to be considered because the taper rate doesn't make sense. I don't know if anybody would like to make a comment here, but it just doesn't make sense—7.8 per cent off your savings. That comes off your pension.

CHAIR: I understand.

Mr King : Do you know what the taper rate is? I'm not being rude.

CHAIR: Do you mean the exact number or what it is?

Mr King : What it's all about and how it works.

CHAIR: Yes, I do.

Mr King : You get your pension and, if you've got—

CHAIR: It progressively declines.

Mr King : assets, it comes off. In the olden days, the taper rate was used to keep somebody on the same rates, so, therefore, when you've got a pension of, say, $40,000 or $30,000 and you've got other assets coming in, they didn't want you earning more than—

CHAIR: I understand, Mr King. We need to allow enough time for other people to make submissions.

Mr THISTLETHWAITE: Are you referring to the changes to the taper rate that the government instituted in the 2015-16 budget?

Mr King : The '16 budget. The '14 budget was 3.9 per cent and then it went up to 7.8 per cent in 2017. Most people would have been wiped out. If you've got more than $70,000 or $80,000, you're wiped out on the pension.

Mr THISTLETHWAITE: I understand what you're referring to.

CHAIR: Yes, we understand. Thank you, Mr King.

Mr Dunn : Good morning. Thank you very much for the privilege of speaking. I'm 78 years of age. To highlight how long you're going to have to look after me, I've got a pulse rate at rest over 24 hours of 43, so 2057 is my projected date of death! So there you are.

CHAIR: And may long you live, Mr Dunn.

Mr Dunn : I've got a great attitude to life. At the age of 22, I made a prophetic statement. I said, 'I can't let governments look after me in my old age.' I properly could have back 56 years ago, but I've had that attitude ever since. Despite many, many ups and downs in life, I finally retired when I was 58, so I've been retired 21 years now. I have run that super fund since 2002, when I took it out of the hands of AMP. I've been doing the administration as of two years after that, so I've run it quite a while now.

I'm not a slouch when it comes to running my own affairs. I've managed to increase the value of those shares in the super fund in the period since by (a) taking the minimum, and (b) being frugal in how I manage to do things. I'm getting an over seven per cent return on money—dividend and interest. So I'm not one who's going to complain too much. In fact, we live so modestly that we, in actual fact, use the entire imputation credit that I am entitled to, which is about an average of $16,000 a year—even though I don't have anywhere near $1 million in super, and I'm trying to emphasise this particular point, I still get that return. Between my wife and myself, about $10½ thousand a year of my imputation credit goes to charity—I know that's rather significant, but I can prove it in my tax reports—and about $6,000 goes to helping my son as he has an autistic son and the costs are quite significant, which you would be aware of.

What I'm objecting to personally is the fact that governments now consider they know better what to do with my money than I do, and therefore I can't get the opportunity to give to charity if I wish to do so or to give it to my son if I wish to. I'll be less affected by it than anybody else in this room; that's why I'm a little bit more relaxed than most of the people in this room. The point I'm getting at is—for those people who aren't fully aware of the figures, I'll give you the actual facts. When you get paid $100 in dividends—let's say 100 per cent of dividends—and you get 42.85714 per cent in imputation credits, if you divide that imputation credit by 142.85714 you will find that for every $100 that you've got invested in Australian shares you are going to be taxed 30 per cent of it. You'll lose 30 per cent of your income. That's exactly where I'm at.

I would like to finish this off just quickly. How can I do this in one sentence? I really object to the situation and I feel sorry for the fact that politicians can't wake up to themselves and know these things themselves and never even think about doing what they're contemplating doing. You've got to be nuts.

CHAIR: Thank you very much, Mr Dunn. Next is Mr Gary Golding.

Mr Golding : I'm 67 years old. I retired when I was 62, following a diagnosis of Parkinson's, so I have considerable medical expenses coming up in the near future. I don't think it's necessary to reiterate what's already been said about fairness, economic impact on individuals, discouraging people from becoming self-funded retirees and double taxation.

I note that there will be a reduction of capital in the Australian share market. It's a moving of goal posts for retirees. Having a tax-free threshold that depends on how you generate the income doesn't seem very fair. Even the inevitable share market devaluation will result in a subsequent loss in Australian superannuation funds, which will have a double impact on retirees. I was aware that there was a large amount of money tied up in super. Being a little bit paranoid, I realised that this would be a magnet for the unscrupulous, as we saw with the GFC. I decided to have some money outside super which I could have some control over. I'd also like to put to the committee that the reduction in company tax is also going to have an implication on the franking credits, which will affect the individual shareholders. So there will be a double whammy, basically. From the reduction in company tax the credits will be less regardless of what the government decides to do with this proposal.

I've read many estimates about how many people are affected by this. It ranged from 100,000 to the very wealthy. I'd also like to say that it also affects the children of retirees, because in the not-too-distant future they're going to inherit this. Politicians are very fond of looking at the forward estimates by multiplying everything by a number to make it sound bigger, so I propose that if everybody here multiplied their franking credits by 10, they'd get a true estimate of the loss of wealth to their family over that period. My daughter has indicated to me that she is going to change her vote based on what she sees as an unfair policy. I suggest that, as politicians, you should look at multiplying the number of people involved not by one but by three or four to cover family members that are going to support the rest of their families. I've been amazed by any policy promulgated that would affect so many electors. I might remind that in 1963 John McEwen won the election for Menzies by one vote and in Greenslopes in 1996 Wayne Goss lost by four votes. So throwing away hundreds of thousands of votes is not a way to win an election.

The GST was successfully implemented because it was across the board. People accept fair tax reform. This is unfair and penalises a few. It'd be fairer if you took a proportion of everybody's franking credits, not just the lot of some. I'd like to also say that, at the recent Labor Party conference, I heard Bill Shorten on the radio, without referring directly to franking credits, said, 'I get it; nobody likes tax reform.' I would suggest that he doesn't get it. People don't like unfair tax reform. Thank you very much.

CHAIR: Thank you, Mr Golding. Next we have Rodney Lovell.

Mr Lovell : I'd like to share my opinion with you today. I think it's fair to say that everybody who has spoken prior to me today has spoken from a position of conflict of interest. They were all representing themselves, obviously, and they were all talking about their personal situation, therefore they have a conflict of interest when they're presenting their information to you. Similarly, Mr Shorten has a conflict of interest. He's talking from a position where he is trying to do something positive for him. In my opinion, by destroying self-managed superannuation funds and promoting industry funds and other superannuation funds, he's failing to declare his conflict of interest as a former union organiser and official to promote superannuation with union based funds. The unions are the largest donator of funds to the Labor Party. What he is trying to do, in my opinion, is introduce legal corruption—that's my term, as an opinion.

There are unintended consequences that he obviously doesn't care about, in the same way that I am old enough to remember when the Labor government was in power in Victoria. They destroyed the State Bank of Victoria. The joke at the time was: 'What's the capital of Victoria? No longer is it Melbourne. The capital is 5c.' The socialist Premier that they introduced, Joan Kirner, was the person who introduce poker machines, affecting the most vulnerable people in the state. That had an unintended consequence. It absolutely destroyed the lower class of people. Subsequently, the poker machines were taken over by Mr Kennett on the Liberal side. I remember he approved a poker machine design to change the arm-pulling mechanism that used to be there and said that was causing a habit-forming mechanism. People enjoyed pulling the handle, so they introduced pushbuttons to make it easier and to reduce that habit-forming mechanism in people. The unintended consequence was that poor people lost more money.

At the moment, there seems to be a push to introduce socialist style politics across the board. I've been in a member of unions. I've been against unions. I've seen unions destroy people who were union supporters who, just by chance, owned businesses. I've worked in organisations large, small, public and private, the Public Service, emergency service and the military. I've seen unions not defend people who were in need of it. I've seen them do deals with employers. I've seen employers who were looking after their workers better than a union could ever dream to. I've seen the unions, who this change to self-managed super funds will benefit from, become salesmen for trouble, because if there's no trouble in an organisation they have no members. So they have to introduce some manufactured trouble into an organisation to create dissent—which causes conflict between management and the workers—just so they can maintain members. At the moment there also seems to be a push for infrastructure building in Victoria, and public service building in Queensland, which costs the states, going backwards and into debt, and the unions gain more members as an offset. Thank you.

CHAIR: Thank you very much, Mr Lovell. Somebody said as I walked in that I should not mention the fact that I'm a Victorian amongst this crowd! I would just like to defend that—and the state of Victoria's capital is Melbourne! Next we have Caji DeSouza.

Mr DeSouza : Thank you. I'm a chartered accountant. I worked in regional banks for some 25 years and I've been retired for about 20 years. The dividend imputation system was introduced by the Hawke government in 1987 to stop double taxation: first the company paid tax on their revenue and then the shareholder had to pay tax on that same revenue. That's what it was trying to stop. But that system required an offset from other income tax that was payable by the shareholder. So a lot of people that didn't pay income tax missed out, because they couldn't get the benefit of the offset. The Howard government, in 1990, looked at this and said, 'This is unfair. Low-income people are missing out. We'll bring in a refund system.' That received strong bipartisan support at that time.

Over the years, a lot of people invested in shares of local companies, and companies were able to invest that money and create jobs. If we take this dividend away, that market will drop quite significantly and it will impact investment in Australian companies and thereby impact jobs. I think that's a significant point. Refunds are currently estimated to be around $5 billion to $6 billion a year. This large amount of refunds has built up because people invest in local companies.

I did some research for National Seniors in New Farm, and we had a debate on it mid last year. What came out of that was quite informative. This represents 1.5 million people being impacted by the refund system, including 300,000 pensioners. In the discussion I had at National Seniors, there were quite a few pensioners there, but very few of them had shares, so it didn't impact them. There were others there who were impacted, and they were quite upset by the change proposed by the ALP. As I said, 300,000 pensioners are now out of the system; it doesn't impact them. But there are another 1.5 million people who are impacted. Of those, 200,000 are in self-managed super funds, mainly small funds that do not have other income to offset under this system. The rough estimate is that it will impact the other around one million people by the amount of $5,000 per year. For some of them, it's a significant impact, and the consequence is that they will end up in the pension system, which will cost the budget more in the long term, and I think that is significant. If you take this away from low-income people, they'll end up in the pension system and it will cost the taxpayers a lot more, going forward.

There's one other consideration that needs to be looked at. Under the rules, there is a 45-day period where people need to stop trading to get the benefit. A few financial planners are exploiting this on behalf of low-income people, and they're gaming the system. We need to close the loophole that provides that opportunity. How significant it is, I don't know; but it's something that the committee needs to look at to stop that loophole being exploited.

There were some suggestions made that the $5 million could be put towards schools, but schools are getting plenty of money now. With the money going to schools, we don't get a proper return when we compare ourselves to other countries; they pay less per capita for a student and they get a better outcome. We need to increase the benefits to the school system to get a better outcome—better teachers, reward them better and get better outcomes.

Another suggestion from one significant person was that we should take that money and help reduce company tax. Company tax should be reduced anyway. Look what happened in America. Trump reduced company tax significantly and the stock market went up and employment was created. The unemployment rate in the United States is about 3.7 per cent. It's five per cent here. So we need to reduce company tax. It's not part of this debate, but it's significant going forward. I think I've made my point. Thank you very much.

CHAIR: Thank you.

Ms Henry : I am a self-funded retiree. I'd like to point out that this proposed change will affect everyone in the long term. It's just that people who aren't at retirement just don't think about such things. Also I'm very concerned in the media that you read these so-called experts, and I wonder if they've ever put in a tax return—they don't even seem to know how you do it. I just find it very distressing that people don't understand the subject, and obviously the Labor Party don't, because they put it out and they didn't even work out that it would affect pensioners, so goodness knows. As far as I can see with personal tax, anyone who has an average tax rate—not their marginal tax rate—that is less than 30 per cent will be affected by this if the majority of their income comes from shares.

Being a retiree, you look at the interest rate, you look at rental properties, which are just a pain in the neck; shares are most probably the most sensible thing to go with. It's supporting our country, keeping capital here. I have concerns about investing in international shares; I don't have enough knowledge and I'm very concerned about that, and I'm concerned about having to rearrange what investments I have. On my calculations, if anyone getting the majority of their income from Australian shares that are franked has a personal income of less than $138,000, this proposed change will impact them.

On the issue of superannuation, they say it's not going to affect the big industry funds. Well, if all the money that's now sitting in self-managed funds, especially in the pension phase, goes over to the big funds, I think that they'll be rearranging their investments too. At the moment the APRA funds have a refund of $309 million, so some of those funds are getting refunds of their franking credits too.

In summary, I just think that it's unfair. I think that all Australians should be taxed under the same rules. This seems to be a blatant grab of funds that retirees have saved—not gone overseas on holidays every year, not had a brand-new car every year. They've thought, 'Well, I'm possibly going to live into my mid-eighties and I don't want to be a burden on the government, so I'll save and do things according to the rules at the time you've made the decisions.' Thank you.

CHAIR: Thank you very much, Ms Henry. On behalf of Australian taxpayers, we appreciate your ambition to be independent, and I and I'm sure some members of the committee, at least, respect and encourage and support that. In the few moments we have left, does anybody who feels they have not been able to make a statement wish to do so? If you haven't had a chance to make a statement, I will give you priority. Yes, there are two gentlemen. I've seen your shirt, sir, so I'm presuming that's what people are chuckling about.

Mr Farrall : Thank you. My name is Frank Farrall. I'm 74 years of age. I've been lucky. I've travelled widely. I've worked in Australian banks—London, Melbourne, Brisbane—and occupied senior roles, and I can't say I'm impressed about the behaviour. I did not put a submission in, though I was tempted to. My background is mostly in corporate. I was chairman of Bowen Energy. I served on the board of three other public companies. Those companies were listed here and in Singapore on the club. I've had a fortunate background, having considered the fact that I have a fair knowledge of this arrangement, and it disturbed me, not from my point of view. It disturbed me, and I'm wearing this shirt. I think of all the people that I've met and known. I've managed a bank from the lowest level up to a senior level. I'm okay, but I think of my brothers. I think of family. I think of the people here.

And I also think about the cause of this. And if I've got one quick second, I'd like to say that back in 1982 to '89, before the recession we had to have, banking was a system, and so was saving, and you had paper—checks. You had means of knowing what people did. You had an understanding of saving. You didn't have credit cards and you didn't learn that debt is a way to make money. So our background was to save. And I came from a poor background. I couldn't go to university. I failed English and I had to study, but I worked my way up in a big bureaucracy.

I'll come back to the point now quickly—and very quickly—that it's all changed. It's changed since the recession we had to have in 1989, and we know the background. The new generation that's coming through can't see this problem. Many of them, when I wore this shirt out at the exhibition, didn't know what a franking credit was. But, okay, they can have a TAB account, they can have a credit card—they know how to spend. And this generation is coming on with the failure of getting the message that money isn't something that grows on trees. So my point is: I would like the parliamentarians of today, and I'd like the party, to understand that there's an education process, because the schools aren't quite able to deliver it. They're full up with the union and teachers with left-wing and left ideas. They've never had hard times. I went out to a wake of a poor old farmer—who didn't top himself, but he suffered from his farm being taken off him—and one of the persons out there said very quickly to me, 'You know, I'm the only farmer left here. You seem to have forgotten, the young people can't get work out here.'

So my question is to people today. I've thoroughly enjoyed hearing the personal side, but the bigger picture out there has to be addressed—and we own businesses. Ninety per cent of the young ones coming through now are in the wage-earning background, and they've got to understand. So the reason I've spoken up now is very simple. Oldies like us—and I'm disabled now. I don't get a health card; I don't ask for it. But I support—I can't even give money to my immediate family without being penalised. And my old mother-in-law and father-in-law—she's 97 and is in a home. She had to pay $500,000 RAD to qualify. She was told that the home has to take freebies—people who can't afford it—to get the government grant to maintain these homes. I just feel that, serving in the war and coming back and not drawing a fund and working in the post office, it was a hard battle for them to save. But I bet you here there wouldn't be one alcoholic. I bet you there would be very low-key punters. I bet you the lifestyle that we have led would've been a sensible lifestyle. But the new generation—and, unfortunately, I own a few racehorses and I can afford to waste it—the new generation are wonderful, but the policy of parliamentarians is: now, we have to get tough.

CHAIR: Thank you very much, sir. Did you, sir, want to make a comment? You're welcome to make a comment.

Mr Watson : Thank you very much. I will deal with four things I didn't get to before. Deeming rates are a joke. They are unfair and un-Australian. When the scheme was introduced the Reserve Bank the cash rate was one per cent above the deeming rate, now it is one per cent below. What do you think this has done to the money that we've got to live on? Everything is going up. Interest rates—the last 30 rate reviews have not altered. It's been a record time that nothing has happened to interest rates. They're the lowest they've ever been for 30 months. What's this doing to our ability to put bread on the table? Four years ago you'd probably get five and six per cent from the bank with safety. They could reduce. Now they are forced to play the share market, eat into their capital or tighten their belts. There appears no notice of what has already been taken away from self-funded retirees with this new scheme to get rid of the thing.

The government is pushing the Australian chains—their banks. However, if they change their superannuation provider, and their Commonwealth Seniors Health Card is grandfathered, they will lose it. They can reapply but are forced to include their pension as taxable income. They have little chance of getting it back. Also, those retiring now have little chance of ever getting a Commonwealth Seniors Health Card. When their super pension is counted as taxable income it's unfair, unjust and un-Australian.

Bear in mind that most of us are the 18 per cent brigade. We paid 18 per cent for our money. Do you know what I did? I went and got another bloody job at night-time to be able to pay my bills. The government is pushing the Australian [inaudible]. Loss of part pensions was brought in by the current government. Recent moderations to income and assets tests and part pensions have placed great pressure on retirees. The government stated they could go on a pension if they lose their capital. What a great reward after we've provided for our old age to say, 'Go on the pension you silly old bugger.'

What I would like you people to do is to take into consideration the income we had. With my home I'm up for $12,000 a year in rates, Medibank private and so on and so forth. The way things are going in five years time that'll be $18,000. And what's happened to our income in the last five or six years? Thank you very much, gentlemen.

CHAIR: Thank you everybody for attending this morning's hearing and for participating in the inquiry. As noted, all of the submissions that have been made today will go into the official record of the inquiry and will go towards the committee's deliberations in terms of its final report. Ordinarily inquiries take written submissions and might hear from stakeholder groups. We have made it very clear that we want to hear directly from Australians who may be affected by a change of policy and that's required your participation here today. So I want to say on behalf of the entire committee thank you very much.

Please also note that written submissions will continue to be accepted throughout this inquiry, so if you have something you can hand it to John here or you can submit it through the Parliament House website at

Proceedings suspended from 10:39 to 14:00