The Association of Independent Retirees (AIR) chided the plans of the Australian Labor Party to increase the capital gains tax by 50%, saying this would hurt retirees who are relying on investment returns.
In a statement, AIR acting president Wayne Strandquist tagged Labor's plan as an "unjustified slug" on retirees who have invested in assets to fund their living expenses.
"Self-funded retirees rely solely on returns from their investments to provide income to live. These returns can come from interest, share dividends, franking credits, property rents and the sale of investment assets," he said.
When retirees sell shares or other growth assets, the discounted net capital gains are added to their income for the year. They still pay tax on this income despite the over 20 years-worth of growth these assets may have already realised, Strandquist said.
"The Labor Party’s proposal to increase tax on capital gains by 50% will mean a substantial reduction in the investment returns for retirees who have saved their entire working lives so that they don’t have to rely solely on the government aged pension," he said.
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Retirees depend on the acquisition and sale of assets as an investment strategy to minimise risks and maximise growth. Strandquist believes that selling down assets such as shares and property allows retirees to fund aged-care accommodation and afford living expenses.
Should the capital gains tax changes be implemented, individual investors who purchase assets after 1 January 2020 will pay 50% more tax on their future capital gains. No pensioner exemption will be given for that 50% hike in capital gains tax.
"Together with the loss of franking credits refunds, no negative gearing for pre-owned properties and other proposed tax changes, it is clear that the Labor Party thinks retirees are a soft target. But, with the increase in capital gains tax, retirees won’t be the only group funding the many spending initiatives the Labor Party has announced," he said.