Labor recommits to 1 July start date for franking credit change

Labor has recommitted to a 1 July 2019 start date for its franking credits policy, and rejected grandfathering the changes.

Labor’s policy of stopping refunds of excess franking credits is set to start from 1 July 2019 – if they win the election and pass the required legislation. This start date for the policy has previously been announced.

But Labor recently announced that its changes to negative gearing and the CGT discount, which in some cases are subject to grandfathering, would not start until 1 January 2020.

Labor Shadow Treasurer said that the 2020 start date for these policies would give investors “adequate time to plan and invest this year before the new rules come into force”.

“It also means that we will be able to take the necessary legislation through all the necessary legislative processes including ensuring draft exposure legislation is properly consulted on.”

Speaking on ABC’s Insiders, Mr Bowen said that starting the policies on 1 July 2019 would be “too rushed”.

Asked why some tax changes would be grandfathered but the same wouldn’t apply to franking credits, Mr Bowen said that the policy had been outlined “way in advance” and that refunding excess franking credits had only been around since 2000 while negative gearing had been in place for “a hundred years or so”.

If the franking credit policy was to include grandfathering, Mr Bowen said “I think you would have people holding on to shares to keep the benefit, and you’d have a pretty big distortion to the market”.

“We think its no longer fair or sustainable to be spending 6 billion dollars a year on giving tax refunds to shareholders who’ve paid no income tax.”

The SMSF Association says the Labor party has shown “total disregard” for self-funded retirees with the start date of its franking credit change.

SMSF Association CEO John Maroney said that “Labor is taking this discrimination to a new level, giving those affected by its CGT and negative gearing proposals time to adjust their investment strategies while denying self-funded retirees the same option”.

“That these retirees will not have the certainty of legislation to allow them to restructure their affairs and, in many instances, be severely financially disadvantaged because of it, is simply unjust.”

“They have spent a lifetime working to be in a situation where they can self-fund their retirement – the very goal of the compulsory superannuation system that Labor introduced in 1992. Now they are not only having their self-sufficiency taken away but are being given no opportunity to find alternative strategies for their retirement savings.”

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4 thoughts on “Labor recommits to 1 July start date for franking credit change”

  1. I strongly endorse John Maroney’s comment that it is unfair to change legislation with effect from a certain date (here 1 July 2019) when it seems very unlikely that it will be clear by that date whether the legislation can actually pass the Senate. The effective date of implementation should definitely be after the legislation has passed both houses. Until then the ALP is placing people in No Man’s Land. You should do X if the legislation will pass but Y otherwise. So what do you do? It is unreasonable, Mr Shorten and Mr Bowen, to leave people to guess whether legislation will pass.

    1. Labor isn’t the only party to have policy ahead of legislation. The Coalition announced a 12 month amnesty for employers who hadn’t paid their Super Guarantee obligations starting on 24 May 2018 – except the legislation hasn’t passed and likely won’t.

  2. Will those franking credits that are not refundable to me still be included in my taxable income ?

    If I put the value of my shares into an industry super fund do I then get the value of the franking credits ?

    1. Probably, and maybe. There is no draft legislation released for the policy, and there won’t be before the election. This leaves the exact operation of the measure, if it becomes law, unclear. This includes how it will operate within industry – and retail – superannuation funds. For instance, SunSuper says: “The full extent of the proposal is still largely unknown, and additional clarification is being sought by the superannuation industry.”

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