Labor Party leader Bill Shorten proposed changing the current franking credit refundable imputation scheme in March 2018, drawing the ire of several advisers including former Henderson Maxwell chief executive Sam Henderson.
This week, Plato Investment Management managing director Don Hamson launched a petition to prevent such changes being made to the system, arguing that many retirees and pre-retirees have built their retirement plan based on the rules already in place.
“We can’t keep tinkering and changing the system for those already in retirement,” Mr Hamson said.
Mr Hamson said Labor’s proposed changes are “discriminatory against mature superannuation funds” and would mostly impact those with self-managed super funds, particularly those who fall “just outside” the asset test thresholds.
“Labor’s proposal could also result in SMSFs circumventing changes by transferring the Australian equities part of their portfolio to a ‘wrap’ type of fund that will then be able to refund the imputation credits,” he said.
The creation of the petition comes as several industry associations, including the AFA and SMSF Association, have formed a new lobby group, called the Alliance for a Fairer Retirement, to also challenge the proposal.
“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.”
“It is a refund” because it goes to shareholders of companies that have paid company tax on their behalf. As the shareholders are retired and pay no tax on earnings from their Super Fund (pension phase) they are entitled to receive these tax payments back from the Government. Otherwise, if they don’t receive these credits back they are then paying tax at the rate of 30 cents in the dollar – a higher rate of tax than most people in fulltime employment. How can that be considered a fair and just system -hardly.
“it’s not a refund – it goes to people who haven’t paid income tax”
It goes to people who have been taxed. They were double-taxed before 1987 but single-taxed since then. Their single tax has been refunded since 2000.
Don Hamson’s a smart guy and a good bloke but at the end of the day he’s just another vested interest. Australia cannot afford to give away all its tax revenue with stupid policies like this. The current franking ‘refund’ (it’s not a refund – it goes to people who haven’t paid income tax) means some company earnings will generate ZERO revenue for the Federal tax base. This needs to be fixed but in such a way as those who can least afford it are not financially damaged.