Franking credits boost spending in retirement by 5-6%: research

New academic research has found that the franking credits on dividends boosts consumption in retirement by 5%-6% – the equivalent of a 8%-9% higher balance at retirement.

The paper What Dividend Imputation Means for Retirement Savers was written by three academics at the ANU. “Our results highlight that dividend imputation makes a significant difference to retirement savers, both in terms of how they might structure their portfolios, and the value that it generates.”

The researchers note Labor’s policy of stopping refunding excess franking credits, saying “such a policy change could potentially end, or at least limit, access to imputation credits for Australian retirees”. Though the research does not model Labor’s policy, instead taking a broader view look at franking credits. Read more...

Parliamentary inquiry into removing refundable franking credits set up

A Parliamentary Committee will inquire into implications of removing refundable franking credits

The House of Representatives has set up an inquiry into the implications of stopping refunding of franking credits – a Labor policy.

The House of Representatives Standing Committee on Economics will inquire into the “implications of removing refundable franking credits”.

In March Labor announced a policy of stopping the refundability of franking credits, from 1 July 2019. Two weeks later the policy was changed to exempt Age Pensioners and some SMSFs. Read more...

Alliance launches anti-Labor imputation credit policy website

The Alliance for a Fairer Retirement System, which includes the SMSF Association and National Seniors Australia, has launched a website as part of its campaign against Labor’s imputation credit policy.

Labor has a policy of stopping the refunding of imputation credits for most taxpayers, a policy which the Alliance says will be detrimental to retirees and small businesses – who can lodge their concerns about the policy on the website.

The Alliance says there is growing scrutiny about Labor’s policy, including a disputed Treasury analysis. Read more...

Treasury finds $10 billion ‘black hole’ in Labor imputation credit policy

The Government claims to have found a $10 billion ‘black hole’ in Labor’s policy to stop most refunds of imputation credits.

Labor says it’s policy will raise $55.7 billion over 10 years, based on Parliamentary Budget Office figures. But a Treasury costing finds it will raise $45.8 billion.

“A detailed Treasury costing of Labor’s retiree tax proposal has revealed a $10 billion black hole in Labor’s expected budget revenue from denying tax refunds for dividend imputation credits over the medium term,” said a statement from Treasurer Scott Morrison. Read more...

Alliance formed to fight Labor’s franking credit changes

A group of superannuation, investment and retirement associations have formed an alliance to fight, in part, Labor’s proposed changes to refunding imputation credits.

The Alliance for a Fairer Retirement System was formed in response to Labor’s policy of stopping refunding imputation credits for a range of shareholders, according to the Alliance. It will also explore options to fix issues with the taxation of superannuation, means testing of the Age Pension and the broader retirement income system. Read more...

Labor imputation credit policy to cost APRA fund members $3.75 billion

Labor’s policy to stop refunds of excess imputation credits won’t just impact SMSFs, but also some APRA-regulated super funds – to the tune of $3.75 billion according to the Treasurer.

Soon after Labor announced its policy to stop refunds of imputation credits from 1 July 2019 it announced a change to the policy – the policy would not apply to Age Pensioners, or to SMSFs which had member who was receiving an Age Pension prior to 28 March 2018, which Labor refers to as its ‘Pensioner Guarantee’. Read more...

Labor exempts pensioners from plan to stop refunding imputation credits

Labor has announced that all Age Pensioners, and some SMSFs, will be exempted from the recently released policy of stopping refunds of excess dividend imputation credits, a meaningful change to the policy only two weeks after it was revealed.

Labor had announced that, should they win the next Federal Election and pass the required legislation, excess dividend imputation credits would not be refundable from 1 July 2019. This was aimed at the wealthy, but also captures people on low taxable incomes – such as pensioners or retirees drawing tax-free amounts from superannuation. The Coalition had taken to calling the policy ‘Labor’s retiree tax’. Read more...

Angry at Labor’s imputation credit refund policy? Blame Costello

Opinion: Many of the recent policy changes impacting superannuation and retirement planning – including the ALP plan to stop refunding imputation credits – have been a complicated and confusing attempt to wind back tax concessions, and a fair share of the blame for this can be apportioned to the actions of Peter Costello when he was Treasurer.

Labor leader Bill Shorten last week announced the policy of stopping refunds of dividend imputation credits from 1 July 2019, assuming the ALP wins the next Federal Election and the measures makes it way through the Parliament. Read more...

200,000 SMSFs to be hit by ALP policy to stop imputation credit refunds

The ALP has announced a policy of stopping refunds of excess dividend imputation credits, impacting some 200,000 SMSFs along with 1.2 million other taxpayers.

Labor plans to reverse a change made by the Howard government making dividend imputation credits fully refundable, from 1 July 2019 if they win the next election.

Update: Labor exempts pensioners from plan to stop refunding imputation credits

“Self-managed super funds are a major beneficiary of this practice, with 50 per cent of the benefit to SMSFs accruing to the top 10 per cent of SMSF balances – with some funds receiving cash refunds of more than $2.5 million a year,” says the joint statement by Bill Shorten and Chris Bowen. Read more...