The House of Representatives standing committee on economics has today announced an inquiry into the implications of removing refundable franking credits.
The policy was proposed by the federal opposition in March.
The inquiry may also look at expected behavioural change by investors, including increased dependence on the pension; and if there are carve outs applied, what this might mean for additional complexity to the system.
“The ability for investors, including individuals and superannuation funds, to claim their full credits is an established feature of our tax system and is core to the financial security of retirees,” said chair of the committee Tim Wilson.
“There has been legitimate community concern about proposals to remove cash refunds for their full allocation of credits for individuals and superannuation funds, and that it amounts to a tax on the savings of retirees,” he said.
The SMSF sector has been particularly frustrated by this proposal. Technical experts believe it doesn’t achieve the policy objective of targeting wealthier taxpayers, and is therefore unnecessarily impacting trustees who have structured their portfolios in good faith.
Let me make it clear,
1. we worked hard to save money to buy shares and it has huge risks of loosing money.
2. The money we saved to invest companies and companies earn money for us and pay Tax with earnings.
3. The companies we invested to pay Tax for us, this is that we pay Tax indirectly.
4. No matter how much shares or money we have, we are paying Tax regardless and we are entitled to get them legally and it is fair.
5. Pleas remember that Labor, yes that was Labor in 2007-2008, wasted lots and they now robs us once they get the power.
“Labor’s “cash splash” has now seen $46.6 million paid to dead people (nearly $19 million) and Australians living overseas ($27.7 million), the Tax Office has revealed.” (The Daily Telegraph)
The removal of the fracking credits to the superfunds will increase part pensions paid out and reduce the amount held by the funds quicker therefore bringing more people on to the pension earlier.
This proposal is a dagger to the heart of SMSFs and a wonderful boost for industry funds. Given where the proposal came from, this should not be a surprise.
What happened to my post?
I stand to lose about $10,000 of franking credits refunded. Whilst that will be missed, I struggle to see how a case can be made for retaining the credits. Franking credits ensure that there is no double taxation. The company is taxed but where is the double taxation? There isn’t any. Full pension smsf members do not pay tax so how can a case be made for a refund of tax that doesn’t exist.
I’m now 82 years of age and when I created my SMSF, my strategy was to invest only in 100% franked securities to obtain the imputation credits. Labour, who introduced this form of tax rebate now wants to move the goal posts because some very wealthy individuals are using the system in a way that was never envisaged. However, if Bill Shorten abolishes this important form of income, it will take about $9000 from my annual income which represents approximately one quarter of it. I have avoided claiming the pension, because I am just above the legal limit financially. However, when I received an unsolicited $200 in my bank account some years ago I phoned Centre Link to enquire why, only to be told that it was a supplement for low income earners who were not on the pension. (This quarterly payment has now been reduced to $100)
It is obvious to me now that politicians have no idea the ramifications of their policies when they can give with one hand and take away with the other. They trumpet their ideals of helping the not-so-well-off, when in fact they are doing the opposite. The wealthy will still be able to arrange their affairs to offset their losses with their franking credits, while the small investor won’t.
Up to 30% loss of income, falls in share prices of companies where fully franked shares are a key attraction, restructure of retirement portfolios into more risky assets including offshore equities, substantial negative impact on Self Managed Super Funds as a vehicle for independent management of retirement and a very strong incentive to seek government pensions. All for a class war driven ideology and minuscule revenue gain.
Don’t people get a little tired of throwing around the “class warfare” argument!
Labor is ideologically and politically obsessed at what they see as “millionaires” rorting the system. Look at the rhetoric and analyse the comments of Shorten and Bowen in the media. Case rested.
This news is huge and very exciting for the industry in general. A huge thank you to the SMSF Association for their ongoing advocacy on this topic – and those who have joined them. A great outcome.
Another reason to go offshore
the facts of the proposal clearly demonstrate the projected savings wont be achieved & low income earners & self funded retirees will bear the burden,simply falling back on the state earlier as capital declines under the reduced income reality.Bowen clearly doesn’t understand the detail & is just repeating a mantra of headlines citing $83000 refunds as justification.What’s frustrating is that populist class warfare arguments are being made instead of presenting real life case studies as per Leigh Sales interview, which demonstrated Bowens lack of detailed knowledge. Lets hope the house of reps can cut through the political lies & at least get a cap in place, ideally exempting SMSF’s with less than the $1.6M from this poorly thought out policy.
Well if Labour want to try and lose the next election they should stick to it
They should take a good look at the taxation rort that is now Negative Gearing, Oh sorry labor are up to the necks in it so that won’t happen, scum bags!!!!
Yep client couples who previously had $5 million each in Super Pensions now have significant accumulation Super assets that will then still fully utilise their franking credits to wipe out their super accumulation tax.
Yet a client couple with $500k each no longer get any Age Pension and will loose about $5k each in franking credit refund income.
So the couple who have worked hard to provide for a reasonable retirement on their $1 mill combined Super will have lost at least $15k to $20k pa from their retirement income in a few years, from loss of age pension and then franking credits.
How can a policy be so stupid.
Easy I guess it’s designed by politicians who will all be completely unaffected with their gold platted CSS significant Lifetime Pension. What a sad joke Shorten & Bowen are already.
If this actually grows legs I will pull all money out of our SMSF and set up a family trust and use franking credits to eliminate all taxation.
Lot of time and money to spend on a proposal by opposition, guessing Libs want to expose how bad the idea is but can’t argue with them.