Labor’s dividend imputation credits policy

What Labor’s dividend imputation credits policy actually is:

Dividend imputation credits were introduced in 1987 to prevent double taxation. ie when a company pays tax on their profits shareholders receive imputation credits which are used to reduce the shareholders tax liability.

If the shareholder didn’t have a tax liability, or had imputation credits exceeding their tax liability, the imputation credits were unused, just like any other tax offset.

In 2001 the Howard government changed the system to allow cash payments for unused imputation credits. In other words a ‘refund’ of tax never paid, or a handout.

In 2014/15 it was estimated that this cost the budget $5.9 billion a year.

Labor’s proposal is to abolish cash payments for unused imputation credits. That’s it. No changes to the pre-2001 system, and existing pension schemes will be exempt.

So now you know.

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