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

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

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.