In a public statement, the Financial Services Council (FSC) said that it supports the central recommendation of the House of Representatives Standing Committee on Economics Inquiry report into the implications of removing franking credit refunds.
The FSC said the recommendation clearly rejects the removal of refundable franking credits on the basis that it is inequitable.
“However, we note the report doesn’t address the impact of franking credit refunds on large superannuation funds,” it stated.
FSC chief executive Sally Loane said the removal of franking credits would result in the unfair treatment of millions of Australians who invest their retirement savings in some large super funds.
“Figures highlighted in the FSC’s submission to the inquiry show that up to 2.6 million Australians that were in large super funds in 2015–16 received refunds and up to 3.5 million in 2014–15,” Ms Loane said.
“It is therefore somewhat ironic that the report underestimates the number of people affected by changes at about 900,000.”
A survey conducted by the FSC, and detailed in the FSC’s submission to the inquiry, she said, showed that the removal of refunds could on average cost $850 per year for retirees in affected large funds.
“A removal of rebates could result in numerous super investors facing significant financial loss, and an unfair result where many self-managed super funds and some large super funds lose access to refunds, while other large funds are unaffected,” she warned.
“Despite the FSC’s reservations about the report, we nevertheless still support the main recommendation of the majority report that franking refunds should continue.”
While the debate around cash refunds for franking credits has been largely focused on SMSFs, Colonial First State executive manager of technical services Craig Day has also previously explained the impact that Labor’s policy could have on APRA super funds and wraps.
Mr Day said that, while large pooled superannuation funds with significant numbers of members in the accumulation phase relative to members in the retirement phase are unlikely to be impacted by the ALP, it’s possible that some funds may have a larger proportion of retirement phase members.
Funds with a larger proportion of accumulation phase members will generally have sufficient levels of taxable income, including assessable contributions, to fully utilise any imputation credits received, Mr Day explained.
However, depending on the nature of pooled funds’ membership both now and in the future, it’s possible that some large pooled funds could be impacted.
“For example, a combination of a greater proportion of retirement phase members, a lower inflow of assessable contributions and increasing deductible costs combined with negative or reduced investment returns, could result in a fund being in an overall net refund position in a particular year,” he said.
It is clearly confiscation of tax refund entitlements
The mantra by Shorten and Bowen “if you don’t pay tax you don’t get a tax refund” is a complete lie and outrageous propaganda. Cute, brief and intentionally misleading and false.
For every $7 we must report $3 of tax credits withheld by the company . The ATO says it is tax WE have paid; we must include it as TAX in our tax returns. We cannot report just the dividends from BHP TLS CBA.
It is precisely comparable to the tax withheld from employees by companies – they must report gross income not the amount paid by the boss each week. They can then claim deductions for expenses [which we cannot – they are negated under ALP policy] and receive a refund [which we cannot]
The policy is a denial of fundamental universal tax principles: it reintroduces double taxation; it is applied retrospectively; and it discriminates unfairly by charging different levels of tax on the same taxable income.
labor grab of the retirees excess imputation credits is tantamount to stealing the retirees’ entitlements to those excess imputation credits which they have planed for under the previous tax laws, yet now Labor thinks they can come in and steal the retirees’ hard work and careful planning. If this is allowed to happen it will be sheer bastardry and i would recommend voters to really punish the ALP/Green greed!