One of the intriguing questions of the week in federal politics has been why Bill Shorten picked Tuesday to unveil one of the most contentious changes to tax policy Labor has countenanced during this period of opposition.



Shorten and the shadow treasurer, Chris Bowen, knew their proposal to end cash rebates for excess imputation credits for individuals and superannuation funds was going to kick a political hornets’ nest.

While dividend imputation is a relatively obscure tax topic for Australians who live from paycheck to paycheck and have no assets apart from a home that they are likely still paying off, the beneficiaries of the arrangements implemented by John Howard and Peter Costello nearly 20 years ago are acutely aware of how the system works, and have structured their financial planning to take advantage of it.

Q&A What is a dividend imputation? Show Hide When companies pay dividends to Australia​n​ shareholders out of after-tax profit, shareholders receive franking credits​,​ a credit against their own tax​ ​bill based on the tax paid by the company. This system,​ which is ​known as​"​dividend imputation​", is unusual – only ​four other countries in the world use it.



However, in 2000​ ​the then treasurer, Peter​ Costello, made the system even more generous to shareholders by allowing them to claim a cash refund if they received more in franking credits than they owe​d ​in tax. Because income from superannuation is tax free for people over 60, high​-income retirees can use franking credits to get a cash "refund" of​ ​more than 40 cents for every dollar they receive in dividends.



The cash payments cost the budget $550m the first year they were paid. The ATO estimates that​ ​the measure cost $4.6​bn​ in 2012-13, and Labor claim​s that abolishing the payments​ ​from 2019​ ​will save $8bn a year.



To increase the degree of difficulty, Shorten and Bowen unveiled a policy change negatively affecting 200,000 part-pensioners and 400,000 self-funded retirees and their self-managed super funds – a politically influential and well-organised industry if there ever was one – with zero grandfathering or transitional arrangements, which is the equivalent of a base jump in public policy terms.

Policy change always has a context. From the vantage point of Australians focused on trying to arrange their affairs for retirement, politicians keep tinkering with the retirement incomes system. That’s pretty infuriating for people trying to set up reliable income streams to sustain themselves over longer and longer periods, given life expectancy keeps improving.

Lest we doubt the short fuse of retirees, as a recent test case, the Turnbull government fiddled with the super system, and triggered a significant political backlash that is still problematic in its heartland.

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However meritorious the policy, losers never send a thank you card to Canberra. So Labor knew this foray was going to be capital B bad.

And yet the big risky reveal came in the week leading up to a super Saturday in #auspol – one of those rare occasions in the dispiriting sludge that is Australian politics when something genuinely interesting was likely to happen.

The byelection in Batman could see Labor lose a lower-house seat, and the Greens secure a lower-house bloc of two, which sounds like nothing, unless you pause long enough to remember how close federal elections have been in recent times.

Over in South Australia, voters are participating in a live social experiment testing the future of what the populist Nick Xenophon likes to call “the major party duopoly”. On Saturday night we will see whether a political insurgency launched from the political centre – the most interesting incursion by a disruptor since the Australian Democrats shook their tail feathers on the national stage – can alter the political landscape.

The SA contest will be decided on local factors, but this week’s national furore triggered by Shorten and Bowen is static Jay Weatherill didn’t need.

Labor folks working on prepoll in Batman say the cash rebates issue has been raised by a large number of voters in the closing days of the campaign, and there is anxiety – although the pushback hasn’t been visceral. Given both contests are entirely uphill battles, we can be entirely confident that neither Weatherill nor Ged Kearney will be thanking Shorten for his timing.

So having set the scene, let’s return to my opening question: why this week?

Obviously only Shorten and Bowen know the answer to that question, but here’s one explanation floating round behind the scenes which makes a fair bit of sense.

To go with this theory you’ve got to change your vantage point. You need to stop looking in at Shorten, and instead stand in his shoes.

If you stand in Shorten’s shoes and look outwards, this is what you see. You see a byelection in Batman that on the balance of probabilities won’t break your way. The Greens remain the bookies’ favourites, and this campaign has always been the Greens’ to lose. Maybe there is an upset and Labor holds the seat, but if you were Shorten, you’d anticipate the worst-case scenario.

It is also highly unlikely that Weatherill will hold on in South Australia given Labor needs a positive swing of 3% (because of redistributions) to remain where it is now. While the result in SA has absolutely zip to do with Canberra, there is always a deeply superficial flurry about federal implications.

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If that’s how the cards fall on super Saturday night – double trouble for Labor – the 24/7 pontification complex will be in overdrive. Shorten will be on the back foot.

Now we need to hit pause on that thought for just a minute and think through what this week’s policy commitment delivers Shorten and Bowen in practical terms, and how that might influence the timing of any announcement.

The first thing to say about axing cash rebates is it is a revenue bonanza, saving the budget more than $11bn in two years, and $59bn over the decade. As hollow logs go, that’s the size of one of those Californian redwoods that have been upright for centuries.

Labor needs that saving booked and in the public domain in good time before the May budget, which on current indications will contain a promise of personal income tax cuts designed to set the Turnbull government up for an election this year or next.

Labor wants the flexibility to match or outbid that hip-pocket promise from Turnbull. It also has to bankroll a great whack of social spending it already has in train, with more to come.

Bear in mind, too, something that may not be obvious to you unless you are, mentally, standing in Shorten’s shoes: Labor backroom types think the election could easily be this year, not next, so if you think you could be fighting an election between now and Christmas, and you remember the last federal poll was launched the week after the budget, your sense of urgency increases.

The final thing we have to think about if we are standing in Shorten’s shoes is the dreaded internals, and how to manage them.

Let’s just think about a scenario where Shorten has a bad night on Saturday, and then doubles down in the new week by unveiling the cash rebates policy.

So in this scenario Batman is lost, and the pontification complex is already off and racing, and then Shorten unveils the cash rebates policy, which triggers the public backlash we’ve seen this week. This would be written up as a colossal misjudgment, potentially as some kind of panicked response to events, and that would give Shorten’s internal critics an inch.

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Now we need to think about who Shorten’s internal critics are. Principally they are left-aligned colleagues. The left in Labor right now is hot to trot on aggressively progressive economic and tax policy, and there are frequent calls on Shorten and Bowen to muscle up.

The policy unveiled this week sits squarely in that pocket; it is exactly what these folks say they want. Perhaps, if you were Shorten, you might think giving your critics a serve of what they want buys you something. Perhaps a sliver of goodwill.

In any case, in politics, it’s damned if you do, damned if you don’t.

If Shorten was attempting to avoid the spectre of misjudgment following on from a Batman loss, that horse has already bolted.

Labor folks are scratching their heads about why the big announcement came this week, and are fretful about the consequences on Saturday night. The pre-game commentary is already laced with cock-up.

There’s one thing that would put the all hand-wringing and the jockeying to bed, and that’s an upset victory in Batman by Kearney on Saturday night.

I’ve previously described Shorten as one of the luckiest politicians I’ve seen in just over 20 years on the job. The Labor leader is smart of course, and more often than not has razor-sharp political instincts, so it’s not all luck – but so very often, right at the critical time, the wave breaks Shorten’s way.

But the thing with politicians upon whom fortune shines brightly – there is always one question, and it’s an obvious one.

When does the luck run out?