The Alliance for a Fairer Retirement System says that a Parliamentary committee recommendation should prompt the Labor Party to change their policy of stopping refundable franking credits.
The Alliance for a Fairer Retirement System is a group of industry bodies which formed in response to Labor’s franking credit policy.
The Government-led and initiated inquiry into refundable franking credits last week that recommended that franking credit policy not change.
However the Labor members of the committee said the inquiry had been a “farce from its inception”, in part because it was “highly unusual” for a House of Representatives committee to scrutinise an Opposition instead of Government policy.
“This inquiry has been more in the nature of a political campaign, than a parliamentary inquiry at tax payer’s expense,” said the Labor members.
“Labor will take a fiscally responsible approach to the Commonwealth budget. With an ageing population we must make structural changes to rebalance the budget to ensure as a nation we can continue to fund services that ensure Australians enjoy a high standard of living,” they said.
“Ending cash refunds for dividend imputation for those who do not pay income tax is a responsible approach to the Commonwealth budget.”
Alliance for a Fairer Retirement System Chair Professor Deborah Ralston said: “We welcome the release of the report, agreeing with its conclusions that Labor’s proposal is inequitable, deeply flawed, has a rushed timeline, and will unfairly hit people of modest incomes who have retired already.
“As the Alliance has consistently argued, Labor’s proposal will reduce the incentive for many people who save throughout their lives to be self-funded in retirement – defeating a key goal of our superannuation system which is to reduce pressure on Government expenditure over the long-term.”
Ralston said it was a widely-held misconception that the proposal was a tax on the wealthy, “but the reality is it’s not the wealthy who will be most affected”. Ralston went on to say the policy was also regressive, as people on higher incomes could still use franking credits to offset their tax liabilities.
“The overwhelming evidence shows it will hurt many people who could not be described as wealthy, and, at the same time, introduces inequity into the tax system by discriminating against those who have an SMSF compared with members of APRA-regulated funds.”
However the Financial Services Council has criticised the inquiry for not addressing the impact stopping refunds of franking credits will have on large super funds. Though the FSC – which represents the financial services industry, including some super funds – was also supportive of the core recommendation of the franking credits inquiry.
“Figures highlighted in the FSC’s submission to the Inquiry show that up to 2.6 million Australians were in large super funds in 2015–16 who received refunds and up to 3.5 million in 2014–15,” said FSC CEO Sally Loane.
“It is therefore somewhat ironic that the report underestimates the number of people affected by changes at about 900,000.”
“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.”