Seniors say Labor “must” drop franking credit policy

Advocacy group National Seniors says Labor “must” drop its policy of stopping refunds of franking credits to many taxpayers.

National Seniors says its members fear the policy will force them onto the Age Pension and penalise them for saving for retirement.

The group has made a submission to the Parliamentary Inquiry into the Implications of Removing Refundable Franking Credits, containing responses from members. The House of Representatives Inquiry was established by the Coalition.

“We are not opposed to fair and considered reform to the retirement income system,” says National Seniors, in its submission.

“However, we believe the proposed changes will severely impact on lower income self-funded retirees who have worked hard and planned their retirement within the prevailing rules.”

“Because the majority of self-funded retirees own shares, hundreds of thousands of people will be affected by this proposed policy,” said National Seniors Chief Advocate Ian Henschke.

“The policy will hurt ordinary Australians, and not just the wealthiest as Labor claims,” he said.

“Members told us the proposal would financially hit those who had worked and saved hard under the existing tax rules, which have been in place since 2000, to self-fund their retirement.”

“Unlike Labor’s negative gearing policy, there are no plans to grandfather this change. This means seniors who, in good faith, planned for their retirement under existing rules will not be spared.”

Under a tweak to the policy, age pensioners and SMSFs that had at least one age pensioner (or other allowance recipient) before 28 March 2018 will be exempted from the no-refund policy.

“It also discriminates against self-funded retirees and in favour of those in industry superannuation funds,” said Mr Henschke.

The submission says Labor’s policy is unfair because it discriminates against one class of investor: SMSFs in pension phase.

“Unlike regular superannuation funds, SMSFs will be impacted by the change. Superannuation funds will be able to utilise their franking credits to offset tax liabilities because they have a mixture of members in the accumulation and pension phase. These funds can then pass this benefit on to their members. Small SMSFs that do not pay enough income to attract tax will not have this benefit,” says the submission.

“This proposal will have significant and longstanding impacts on the capacity of self-funded retirees to be self-sufficient and self-reliant in retirement. National Seniors does not support policies that undermine the capacity of Australians from maintaining their economic independence as they get older or policies that give the impression that the regime is constantly changing. It destroys faith, not just in the superannuation system but in the political system itself.”

The Parliamentary Inquiry originally had a due date of 2 November for submissions, but is now accepting submissions throughout the inquiry.

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