One of the more unlikely outcomes of the recent federal election, apart from the surprise return of the Coalition government, is that many Australians who had never heard of franking credits are now aware of them.
The 2019 Federal Election has been announced for 18 May, and the ALP are now presenting their campaign policies to the nation.
Which investments are most popular with SMSFs? A short and simplistic answer is that shares and cash and term deposits compete as the most popular investments across the board for SMSFs.
You can receive a tax credit by buying shares in Australian companies that pay franked dividends. Dividends paid to shareholders by Australian resident companies are taxed under a system known as imputation.
Many of today’s retirees are feeling betrayed. In 1992, Australians entered into an agreement. They agreed with a plan made by the politicians of the day that, in order to reduce the burden of the Age Pension on future generations of working taxpayers, everyone would save super for their own retirement.
Reporters need to economise on words, so they use shorthand: words like “dividend imputation”, “franking credits”, and yes, “retiree tax”.
SMSF members could be forced to take on more risk, should the ALP be successful with its plan to scrap cash refunds from franking credits.
This article broadly explains how superannuation is taxed, including when you make contributions, as your super grows, and when you access your super.
In this article, I dig into this subject in more detail, particularly for those who hold their shares directly in their own names, to show what the ALP proposal really means and how it would operate.
The issue of whether or not retirees should be able to get a refund in dividend imputation has sparked considerable discussion of retirees’ income and wealth.
Labor has capitulated to pressure to exempt pensioners from its plan to end cash refunds for dividend imputation credits – a concession that would shave only A$700 million off its large projected savings over the forward estimates.
The Australian Labor Party’s proposal to deny a cash refund on excess franking credits from Australian shares has very similar effects to the destructive and self-defeating consequences of the federal government’s 2017 changes to the Age Pension asset test.