Rice Warner proposes rebate for imputation credits
In response to Labor’s plans to disallow refunds for excess franking credits for many retirees, Rice Warner has proposed an alternative policy to introduce a rebate threshold for each taxpayer.
In a report prepared by Rice Warner for the Alliance for a Fairer Retirement System, Rice Warner said Labor’s new tax policy is flawed and will not deliver the revenue expected by Labor.
“It is easily avoided by a change in asset-allocation, by bringing accumulation members into the fund or by partial or full transfer into an APRA fund, so it will not deliver all the tax claimed,” the report said.
It also criticised the proposed policy as being product specific as it will attack SMSFs, but few other types of superannuation funds.
The report said the policy will also encourage retirees to shift away from Australian shares to less appropriate assets, which could weaken Australia’s domestic capital market given that SMSFs hold more than 12 per cent of listed Australian shares.
Rice Warner also questioned whether the new tax would be necessary in light of the other changes to the tax system proposed by Labor which will raise significant amounts from wealthier Australians.
“Should Labor need this additional revenue, there are better ways of collecting it,” the report said.
Another mechanism that could be considered for collecting tax from those with large imputation credit rebates, the report said, is to have a rebate threshold which would exclude most people with low credits and cap those with large ones.
The amount could be set at $3,000 to $5,000 per taxpayer, the report said.
“[Another] option would be to force members to transfer excessive amounts out of superannuation when they reach a certain age say, 65,” it suggested.
“We suggest a threshold of say $3.2 million for all accumulation and pension accounts combined. In other words, double the pension transfer balance. Amounts above this would be transferred tax-free out of the low-tax superannuation environment.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.