The Alliance for a Fairer Retirement System said in a statement that it formed last month to “represent millions of senior Australians, shareholders, self-funded retirees” in response to the Labor proposal.
According to the statement, the Alliance is comprised of nine organisations including the AFA, the SMSF Association, and the Stockbrokers and Financial Advisers Association.
“Many small business owners may be unaware of the impact of Labor’s proposal on their retirement plans,” said Alliance spokesperson and Monash University professor Deborah Ralston.
“Those who have invested equity in their company and rely on dividends to fund their retirement may be surprised to find a significant fall in income.”
The statement said the Alliance intends to “explore options to fix problems with the existing superannuation taxation, age pension means testing and broader retirement income systems”.
A LOT Of PEOPLE FORGET
IF ITS NOT BROKEN,THEN DON’T TRY & FIX IT
REGARDLESS WHO YOU VOTE FOR,MOST MPS keep on trying to Mess with our CURRENT SMSF
LEAVE IT ALONE
YES I HAVE WORKED EXTREMELY HARD OVER 29 Years & as the Governments of the Daysa kept on saying,INVEST IN SUPER,NOW IF THE IDIOTS LABOUR GET INTO POWER,IT Will Cost me at Least $35000 per Year
[quote=Anonymous]I’ve explained twice already. Franking credits are to prevent earnings being taxed twice. Therefore someone who pays income tax gets a refund for the franking credit. Under your model some earnings never get taxed at all. Howard/Costello created an anomaly encouraging retirees to invest in dividend paying companies purely to receive a free credit from the ATO – not actually because they were good companies. It’s a ridiculous situation and should be fixed. As I said, perhaps it should be grandfathered so existing retirees are not penalised for Howard/Costello’s stupidity. However, Australia cannot afford to keep giving away budget revenue to satisfy the LNP’s small Government ideology and trickle down idiocy.[/quote]
So its ok for a couple on a pension of $160,000 each (of fully franked dividends) to receive a reduction in tax payable of about $96,000 per annum but a couple on $29,000 each to receive no refund and effectively lose $17,000 in a cash refund? Their cash income then falls from $58,000 to $43,000.
If my memory is correct the total Franking Credits rebated each year amount to about $50 billion. The refunds to non taxable entities total about $5 billion and all of this $5 billion will be taken off the low income earners. If cash refunds are cut to nil, to be consistent, all franking credits will have to be reduced to nil. AND that is not a viable option.
As I’ve said, there may be an argument for grandfathering (or alternatively for maximising the credit that can be received). Retirees did nothing wrong. They were encouraged by Howard/Costello to shove all their savings into high dividend paying stocks in order to receive a cheque from the ATO. Without this, no low income earner in their right mind would have invested their entire savings in a small number of high dividend paying stocks.
Most of this credit goes to wealthy retirees – it is a furphy that low income earners are being targeted by this. They will be protected.
Another unintended consequence perhaps would be the decline in share prices of the stocks that pay franked dividends thus eroding the values of share portfolios containing such stocks- not only SMSFs but also other shareholders. This would be the result of such shares being less attractive generally as demand would be lower. Thus not only retirees but other shareholders would be affected.
In other words the value of dividend paying stocks is being artificially inflated by this anomaly.
Only artificially inflated if one believes that double taxation should occur like it used to before Keating changed the law. Years ago a company paid about 46% of its income in tax and then a high income individual paid around 60% or more of the net dividend in tax. This amounted to an effective tax rate of about 80%. Now things are more fair and this is very positive for the Australian stock market and the viability of companies that need plenty of capital to expand. .
We’re not talking about double taxation. The credit paid to non-income tax payers means no revenue is received by the ATO at all. Keating changed the rules so earnings would only be taxed once. Howard changed the rules so that some earnings would not be taxed at all. Retirees are encouraged to invest all their savings in high dividend paying stocks not because they are good stocks but because the ATO cuts them a cheque. That is an anomaly in anyone’s language.
Australia cannot afford for Liberal Governments to slash budget revenue again and again and into perpetuity.
That is where you are wrong. What Australia cannot afford a more and more Government spending monuments. To argue that taxes should be higher is to argue that Government makes better spending decisions than the ordinary citizen.
Not arguing for taxes to be increased – this is about removing anomalies. What Australia cannot afford is more and more tax avoidance. In the case of ‘refunds’ against income tax not paid, we are talking about company earnings not being taxed at all. I can’t say this again. You don’t agree with me or you don’t get that – whatever.
No, it is double taxation. You are asking for those with a low taxable income to pay tax at 30%.
Should they also pay a minimum of 30% tax on interest on savings? Rent from an investment property?
What? That doesn’t make sense. The company tax has been paid once on these earnings – the company tax is then being repaid to people who don’t pay income tax at all. Do you understand that this means the ATO receives absolutely nothing on these company earnings? It’s not that difficult to get your head around.
The franking credits fiascp proposed by Shorten and Labor (if it becomes law) will severely impact self funded retirees by up to 30% of their gross cash income. It will not affect those couples earning $320,000 of gross cash flow.
The fiasco was created by Howard/Costello deciding non-income tax payers should get a refund for income tax they haven’t actually paid – thus encouraging self funded retirees to ram all their savings into a handful of high dividend paying stocks. Given this was quite legal, there is an argument for transitioning the change so as not to hurt these people but there is no argument to continue this stupidity indefinitely. Seriously, you think company tax should just be given away entirely? The Keating policy was to prevent earnings being taxed twice – the Howard/Costello insanity meant that some earnings were not being taxed at all.
Wow if you’re posting on this site as a finance professional I worry for your clients. You say a refund of tax not actually paid . You do understand that a stock is a part ownership in that company and through that ownership they pay a share of the company tax in the company they own. Wow just wow
My friend, the company pays company tax on its profits to the ATO. The Government uses that money to pay for services and infrastructure. Keating determined that franking credits could be used by income tax payers so that earnings would not be taxed twice – once at the company level and again at the shareholder level. Howard/Costello changed that so that even non income tax payers could claim the equivalent amount. What this means is that there is no tax levied on these earnings at all. Can you get your head around the stupidity of that? Wow just wow yourself.
Mr Independent Advice.
See my reply above to your first comment. A refund in cash is the same as a refund that reduces the overall tax payable even if that latter refund does not produce a cash refund. So why reduce a person’s tax payable by the franking credit if you will not give a cash refund to another person. Refunds in cash or refunds as a reduction of total tax payable still cost the Government (that is by reduced tax receivable by the Government or as a payment by the Government to an individual taxpayer). The Government cannot treat certain taxpayers differently.
I’ve explained twice already. Franking credits are to prevent earnings being taxed twice. Therefore someone who pays income tax gets a refund for the franking credit. Under your model some earnings never get taxed at all. Howard/Costello created an anomaly encouraging retirees to invest in dividend paying companies purely to receive a free credit from the ATO – not actually because they were good companies. It’s a ridiculous situation and should be fixed. As I said, perhaps it should be grandfathered so existing retirees are not penalised for Howard/Costello’s stupidity. However, Australia cannot afford to keep giving away budget revenue to satisfy the LNP’s small Government ideology and trickle down idiocy.
This adviser of over 35 years’ standing agrees with Labor on the policy to remove franking refunds for those who don’t pay tax.
Shock Horror, AFA opposes proposed changes that impact their vested interests. Is the sky still blue?
Where is the FPA? Are they also supporting those businesses of their members?
Wow, a lobby group of vested interests; who knew?!?
And these kind of self serving groups/alliances (Alliance for a Fairer Retirement System) are why people don’t trust financial planners!
Yes, we need to lobby government to stop changing rules but we should also have higher ideals which will build trust within the community. Making advice tax deductible would be more useful than arguing about imputation credits – just change your strategy, or go to an adviser that can do this.
Tax deductible advice. You know you’re about 100 years off being a profession when we can’t even get that through. Like that is frankly embarrassing having to tell someone we might have to consider getting paid a commission because the advice fee isn’t tax deductible. Also an adviser can’t even be a qualified witness on some forms. I blame our relationship with product manufacturers, from the association level to the licensing level.