Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 259

Cuffelinks Newsletter Edition 259

  •   22 June 2018
  •      
  •   

An election fought on tax policy will lead to complex and emotive comparisons, and debate will rapidly descend into divisive claims of a 'class war'. The policy numbers invariably show great dollar amount gains for people in higher tax brackets. It is simply not possible to give a large income tax cut to someone who does not pay much income tax.

This week in Parliament, Labor leader Bill Shorten asked Malcolm Turnbull:

"So under this Prime Minister, should a 60-year-old aged care worker from Burnie aspire to be an investment banker from Rose Bay just so instead of their $10 a week tax cut from the Prime Minister, they can get the Prime Minister's $7,000 a year tax cut for investment bankers?" 

It's a good question from Shorten and rising inequality is not beneficial for society, but the aged care worker might not be paying much income tax. For example, the ATO data below shows the 42% of people earning less than $37,000 pay only 2.4% of income tax. The 3% of people earning over $180,000 pay 30% of income tax. Only 21% earn above $80,000 but they pay over 70% of tax. A person must be earning $1 million to receive the quoted $7,000 tax cut, but according to the ATO tax calculator, they may be paying $423,232 in tax at the moment.      

Number of individuals (left chart) and net tax paid (right chart) by tax bracket 2015-16 

Source: ATO Taxation Statistics, 2015-2016 is latest available data.


Complexity and confusion is inherent in Labor's proposal on franking credits, even creating arguments between Federal Treasury and the Parliamentary Budget Office (PBO). Treasurer Scott Morrison said Labor had not released costings by the PBO, but Jenny Wilkinson from the PBO said its role is to provide a "level playing field" for all Parliamentarians and "trust in policy costings". She said:

"We stand behind the PBO estimates that have been published by the ALP in relation to this policy, noting that all policy costings, no matter who they are prepared by, are subject to uncertainty." 

The PBO had "explicitly assumed" significant behavioural change among SMSF trustees. Labor's Chris Bowen said the PBO has equal standing as Treasury under the Charter of Budget Honesty.

Most of the attention on Labor's policy has centred on SMSFs and pensioners, but a reader has asked about implications outside of super. To answer the question, Jon Kalkman explains franking credits in the simplest way possible in an attempt to clarify (again).

On investing, Anthony Aboud looks at how companies (and fund managers) tend to blame factors outside their control for poor results, while Don Tapscott says we can no longer ignore blockchain. This is one of the clearest explanations of blockchain I have read.

Howard Marks released his client memo this week with a close look at indexing. 

Roger Montgomery takes a swing at the consequences of central banks priming the market with too much liquidity, especially citing Tesla. Similarly, Bank of America wrote this week:

" ... Quantitative Easing was mostly characterized as an environment with too much money chasing too few bonds, lower interest rates, tighter credit spreads and volatility was suppressed ... there is no doubt Quantitative Tightening will lead to the opposite."

Yet most investors are underweight bonds, despite the protection they offer portfolios. We have two introductory pieces. Matthew Lemke looks at how retail investors can access the characteristics that bonds offer, while the White Paper from UBS Asset Management is a primer on bond basics.  

Finally, Bradley Beer warns about new property depreciation rules, and Michael Collinsdescribes the rising power of the Chinese consumer amid the political risks of the trade wars.

Graham Hand, Managing Editor

 

Edition 259 | 22 Jun 2018 | Editorial | Newsletter

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

Super crosses the retirement Rubicon

Australia's superannuation system faces a 'Rubicon' moment, a turning point where the focus is shifting from accumulation phase to retirement readiness, but unfortunately, many funds are not rising to the challenge.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.