Pensioners will be exempt from Labor’s plans to end cash refunds for excess dividend imputation credits.
SMSFs with at least one pensioner or allowance recipient before 28 March 2018 will also be exempt from the changes.
The move was speculated yesterday, as reported by SMSF Adviser, and confirmed this morning by Mr Bowen’s office.
The exemption for pensioners will come in the form of a ‘Pensioner Guarantee’ scheme.
However, SMSFs with large balances remain firmly in Labor’s sights.
“Labor is cracking down on this tax loophole because it will soon cost the budget $8 billion a year,” Mr Bowen said.
“Much of this goes to high-wealth individuals, with 80 per cent of the benefit accruing to the wealthiest 20 per cent of retirees. The top one per cent of SMSFs received an average cash refund of more than $80,000 in 2014-15,” he said.
“Labor does not think it is fair to spend $8 billion a year on a tax loophole that mainly benefits millionaires who don’t pay income tax,” he said.
The reform has been largely slammed by the SMSF community, particularly given its original design means retirees with modest savings would be impacted.
Economist Saul Eslake said there’s a “reasonably large” number of Australians with modest savings who could be hit by the policy, and previously suggested modifications would help counter these unintended consequences.
“There are things that Labor could do to modify its proposal that would help deal with the people who might genuinely be adversely affected that you wouldn’t want to be,” Mr Eslake said.
katarina.taurian@momentummedia.com.au
So now we are again to see double taxing was this not the reason for imputation to eliminate double taxing. Removing the tax refund via imputation credits will shatter the share prices and super funds will suffer including the politicians lucrative arrangements for retirement which this is designed to fund.
Perhaps it is time to look at the generous super schemes pollies pay themselves
Companies pay a dividend which is taxed and opposition says tax credit refund will stop unless consumed by tax liability. Will the same principle apply to other investment incomes like bank interest, trust income etc. grab more when you can. Why apply the hit only for franked share income/
By “pensioners” I thought they meant Centrelink/DVA type pensions, not SMSF pensions?
It’s not a “tax loophole” Chris Bowen, it’s the law!
Having a fair and equitable system that doesn’t result in double taxation is hardly a loophole. I think Mr Bowen should check his dictionary.
Another thought bubble that explodes under the slightest pressure. Rather then admit the first idea was rubbish we now have complicated rules that apply to some people so that a SMSF may or may not get a refund depending on when a pension started.
So a SMF worth $200K that will not be in pension mode until 1st April loses all their franking credits, but one in pension mode that is worth $1.6million keeps all of theirs.
Absolutely ludicrous.
Mr Bowen indicates that calculation based on 2014/15 returns. Pre the TBC. So savings will not be anywhere near what has been stated.
Smoke & mirrors, the opposition knows not much about the SMSF space other than it competes with its industry (union) based funds.
I am now confused. If 80% of the $5.9bn in savings was from SMSFs & existing SMSFs are exempt from the changes then becomes nil savings. So where do the savings come from.
Still don’t understand Labor referring to this as a tax loophole when 30% is taken by the ATO when the dividend is paid – similar to PAYG. The 30% is returned as a refund at tax time. How can this be described as rorting the system by the share owner? it’s a Labor tax grab but we are made to feel guilty by following the legislation..
Here we go – more little fleas on the back! What happened to KISS? It seems all we seem to have in Canberra is the S! The great Australian legislation nightmare. Suck your thumb, make a rule and then have exceptions and exceptions to the exceptions and so ad infinitum.
Oh goody lets all aim to retire on the age pension shall we. With the way things are going there is no incentive for anyone to save and work hard. Hope the government has deep deep pockets in the future!
Well done to the Robin Hood
Now we start to see the carve-outs and all this means is complexity. Hopefully it will be too difficult to explain by the time it comes to the election.
With the carve-outs, what comes into sharp focus is that the policy is a direct attack on high balance SMSFs, the “direct competitor” (at least in the eyes of the Union Movement) of Industry Funds.
To say that some SMSFs will transfer their balances back to Industry Fund is ludicrous. The smokin’ mirrors of Industry Funds utilising franking credit refunds is just clever accounting. The after tax return is the after tax return. When you have a tax policy impact, you don’t need to run for the hills, you just need to think about your asset allocation and portfolio construction.
This policy is looking more like a pre GST birthday cake everyday.
What you would expect from Communists