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

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

With markets near record highs, here's what you should do with your portfolio

Markets have weathered geopolitical turmoil, hitting near record highs. Investors face tough decisions on valuations, asset concentration, and strategic portfolio rebalancing for risk control and future returns.

Latest Updates

Investment strategies

Finding income in an income-starved world

With term deposit rates falling, bonds holding up but with risks attached, and stocks yielding comparatively paltry sums, finding decent income is becoming harder. Here’s a guide to the best places to hunt for yield.

Economy

Fearful politicians put finances at risk

A tearful Treasury chief, a backbench rebellion, and crashing bonds. What just happened in the UK and why could Australia’s NDIS be headed for the same brutal fiscal reality?

Shares

Investing at market peaks: The surprising truth

Many investors are hesitant to buy into a market that feels like it’s already climbed too far, too fast. But what does nearly a century of market history suggest about investing at peaks?

Shares

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

Investment strategies

Will stablecoins change the way we pay for things?

Stablecoins have been hyped as a gamechanger for the payments industry. But while they could find success in certain niches, a broader upheaval of Visa and Mastercard's payments dominance looks unlikely.

Infrastructure

An investing theme you can bet on for the next 30 years

Investors view infrastructure as a defensive asset class rather than one with compelling growth prospects. These five tailwinds for demand over the coming decades suggest that such a stance could be mistaken.

Investment strategies

A letter to my younger self: investing through today's chaos

We are trading through one of history's most confounding market environments. One day, financial headlines warn of doomsday scenarios. The next, they celebrate a new golden age. How can investors keep a clear head?

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.