‘Hatchet job’ on SMSFs blasted as inquiry looms
The government-backed inquiry into Labor’s plans to scrap refundable franking credits has been well received by the SMSF sector, which has vehemently opposed the policy since it was unveiled.
The House of Representatives standing committee on economics yesterday announced an inquiry into the implications of removing refundable franking credits, a signature tax move proposed by the federal opposition in March.
SMSF technical experts, like director at Heffron SMSF Solutions Meg Heffron, have long pointed to the flaws in Labor’s logic that this policy targets larger superannuation funds.
“This measure naturally affects SMSFs to a far greater degree than large funds, because large funds have more members making contributions and therefore have the ability to use up the franking credits,” Ms Heffron told SMSF Adviser.
“In fact this proposal is so detrimental to SMSFs relative to large funds that the ALP couldn’t have done a better hatchet job on SMSFs if they’d specifically targeted them,” Ms Heffron said.
Other technical experts have been similarly frustrated by Labor’s claims that this policy targets a “loophole” being exploited by the wealthy.
“It seems to me that this measure could actually allow the rich to accumulate more in super,” said SuperConcepts’ Peter Burgess at the time the policy was announced.
“Transferring some of their pension balance to the accumulation phase may allow them to use all of their franking credits. The effect will be more retained in super for longer, as they can draw down super from accumulation phase when they need it rather than being forced to take the minimum pension each year,” he said.
Bodies like the SMSF Association (SMSFA) remain “resolutely opposed” to Labor's policy, and plan to lobby to get the measure off the table.
“It’s our stated belief that this proposal will affect more than 1 million Australians either saving for or in retirement and other purposes, with our calculations showing it will cut about $5,000 of income from the median SMSF retiree earning about $50,000 a year in pension income," said chief executive of SMSFA John Maroney.
“The notion that this proposal will only affect the wealthy is simply wrong. An analysis of ATO and Treasury data shows it is those on modest incomes who will be most affected, refuting Labor’s argument that the proposal will only target the wealthiest 10 per cent of SMSFs," he said.