A survey conducted by SuperConcepts with 632 SMSF trustees indicates that 72 per cent of respondents said that they would change their investment strategy to compensate for the loss of franking credit income.
International shares were the most popular alternative investment, with 61.6 per cent of respondents saying that their share portfolio will shift to foreign markets.
SuperConcepts chief executive Natasha Fenech said that this is a big concern for the ASX, local companies contemplating the cost of capital from overseas sources and for the future ownership of local firms if it’s no longer viable for locals to invest.
“Managed funds, term deposits, fixed interest and property attracted between 27 per cent [and] 25 per cent of respondents’ interest as an alternative to Australian shares that pay fully franked credits. Three per cent of responders were unsure of what action they would take, but mostly viewed the proposal as something that would impact them negatively.”
Closing an SMSF was also a serious consideration if Labor’s policy proposal succeeds at the 2019 election.
“It is concerning that 14.5 per cent of respondents are thinking of closing their SMSF as a result of this policy which doesn’t apply tax policy consistently to individuals across different superannuation structures, while 1.4 per cent thought that they might withdraw their super and go to an aged pension,” Ms Fenech said.
“SMSFs play a critical role in the super sector to provide choice and competition against industry and retail funds, and it’s clear that everyone benefits from the competition as it keeps fees in check when consumers have adequate choice in the market.”
Ms Fenech said that it was one of the most pressing election issues facing SMSFs in pension phase, with 66.8 per cent of respondents viewing the proposal as something that will impact them a great deal and only 4 per cent believing that it will have little or no effect on their SMSF.
We’d also be considering closing the SMSF due to this policy change, as we’d lose out the Franking credits. Many quite possibly invest off-shore.
The latest announcement by Labor they will give investors in rental property $8000 a year for 15 years for low rental fees, this policy one being paid for by retirees losing franking credits. Baby boomers pay again.
It amazes me how so many arrogant CEOs and Boards don’t seem to realize their cost of capital is about to rise sharply as we head towards a possible recession. There won’t be willing support from domestic shareholders for rights issues to restore balance sheets if we get another GFC – overdue after years of falsified interest rates.
Such consequences are the natural result of bad policy. If Labour felt the exempt current pension income deduction was too generous for tax free pensions it could have simply proposed limiting it to one tax-free threshold per pensioner and to abolish the transfer balance cap nonsense.
Instead it is driving mobile capital offshore – so much for nation building!
As for individual taxpayers, there are ways to arrange your affairs to get the benefit of franking credit tax refunds spread between family member.
Typical labor Government introduces Franking Credits under Bob Hawk because it suited his re-election agenda, now that other bunch trying to swing some votes does a backflip. If any retirees who have SMSF’s or ordinary portfolios vote against Labor, which I am sure they will = Baby Boomers, Labour is doomed, what does Labour stand for? I have no idea, they too are Champagne Sipping Socialists.