The CPA has labelled these concerns “serious”, arguing that the current approach within the draft legislation of the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2025 ignores the fundamental purpose of franking credits, potentially distorting investment decisions.
CPA Australia superannuation lead Richard Webb stated the proposed framework would lead to “inequitable outcomes for superannuation funds”, especially when franking credits are excluded from the calculation of fund earnings for Division 296 purposes.
“Franking credits exist to ensure income is taxed at the shareholder’s correct tax rate. Ignoring them in the new super tax framework produces an unfair and inconsistent result,” Webb explained.
“For many super funds, franking credits are effectively a refund of tax already paid. Treating those refunds as irrelevant when calculating earnings is at odds with how our tax system is designed to work.”
Much of these concerns have been cited in a joint submission by CPA, Chartered Accountant Australia and New Zealand and Institute of Public Accountants.
“The complex design features of the policy will add considerable administration and system costs for the whole superannuation system, a cost that will be paid for by all members of the system including those who will never pay Division 296 tax,” the peak bodies stated in the submission.
They added: “It alters the tax mix for those already retired and those saving for retirement when certainty is essential; otherwise, it is inevitable that many will be discouraged from making adequate contributions towards their retirement.”
Webb explained that in practice the proposal could result in identical investment returns being taxed differently based whether they include franking credits or not.
“This creates artificial incentives that could push trustees away from Australian equities, potentially harming both retirement outcomes and capital markets more broadly.”
CPA highlights that franking credits and similar tax offsets should be treated as part of a super fund’s net income, “reflecting their true economic value, rather than being excluded under the proposed Division 296 methodology”.
The submission also contains a detailed case study that demonstrates how the current policy settings produce higher calculated earnings, according to CPA, for franked dividends compared to unfranked ones.
“This isn’t about gaining an advantage. It’s about fair and consistent taxation that reflects real income, avoids unintended consequences, and maintains confidence in Australia’s retirement income system,” said Webb.
“CPA Australia urges the government to amend the legislation to ensure franking credits and other similar tax offsets are properly recognised when calculating superannuation fund earnings,” the peak body concluded.
