# Dividend franking credits



## Joel1st (29 February 2012)

Hey there!

Got another nooby question to do with dividends 

I have held onto two stocks ($10,000 amounts each) for only a week (under the 45 day period required), however the dividend amount is only $350 (50% franked) and $120(100% franked), which I assume makes me eligible for getting the franking credits back.

As a student I'm currently working part time, placing me in the second tax bracket (15% for ever dollar earned above 6000). 

So I guess my question is, am I correct in assuming that I am eligible for the franking credits, and will I get more money back because my tax rate is only 15% compared with companies 30% rate. 

Sorry if this seems incredibly basic, just trying to get my head around the whole thing. 

Thanks a bunch


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## bellenuit (29 February 2012)

Joel1st said:


> Hey there!
> 
> Got another nooby question to do with dividends
> 
> ...




Check your dividend statements, but I think it will show for the first dividend:
Franked Amount $175, Unfranked Amount $175, Franking Credit $75
And for the 2nd dividend:
Franked Amount $120, Unfranked Amount $0, Franking Credit $51.43.

Although you include them together in your tax return, if you were to treat them individually this is what happens:

For the first dividend, you add the 3 components together and include in your accessible income. So your accessible income increases by $425. As your marginal tax rate is 15%, you are to pay $63.75 tax on this. But you can then deduct the $75 franking credit, so you will get a rebate of $11.25.

For the second dividend, you add $171.43 to you accessible income. You are taxed $25.71 on this. The franking credit is $51.43, so you get a rebate of $25.72.


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## Joel1st (29 February 2012)

bellenuit said:


> Check your dividend statements, but I think it will show for the first dividend:
> Franked Amount $175, Unfranked Amount $175, Franking Credit $75
> And for the 2nd dividend:
> Franked Amount $120, Unfranked Amount $0, Franking Credit $51.43.
> ...




thanks for explaining that  so my total dividend profit for the first shares would be $361.25 and $145.72 for the second? 

also another question, how did you work out the franking credit? because isn't the franked credit amount = to 30%? sorry If I'm way off hehe  thanks again


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## pixel (29 February 2012)

Joel1st said:


> thanks for explaining that  so my total dividend profit for the first shares would be $361.25 and $145.72 for the second?
> 
> also another question, how did you work out the franking credit? because isn't the franked credit amount = to 30%? sorry If I'm way off hehe  thanks again



 you divide the dividend by 0.7 to get the fully franked, aka "grossed-up", amount.
30% of that is the pre-paid tax (or half of THAT if it's only 50% franked).


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## YELNATS (29 February 2012)

Thanks for the explanation bellenuit & pixel, it clears it up for me too.


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## McLovin (29 February 2012)

Your dividends are under $6,000 for the year so you receive all the franking credits back. I note from a different thread the OP said he was 16, if that's the case he/she has a much lower threshold of $416/year in total dividends in order to receive all the franking credits back otherwise the examples provided are how tax is applied.


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## Joel1st (29 February 2012)

Thanks pixel for that explanation.



McLovin said:


> Your dividends are under $6,000 for the year so you receive all the franking credits back. I note from a different thread the OP said he was 16, if that's the case he/she has a much lower threshold of $416/year in total dividends in order to receive all the franking credits back otherwise the examples provided are how tax is applied.




At the time of that post I was 16, however I'm now 19.


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## bellenuit (29 February 2012)

Joel1st said:


> thanks for explaining that  so my total dividend profit for the first shares would be $361.25 and $145.72 for the second?
> 
> also another question, how did you work out the franking credit? because isn't the franked credit amount = to 30%? sorry If I'm way off hehe  thanks again




That's correct. The dividend is worth more to you than the face value. If you were on 0% marginal, it would be worth even more. However, on the 30% marginal rate, the first dividend would require you to pay additional tax and the 2nd would be tax neutral. To illustrate:

$425 * 30% is $127.5. You paid only $75, so an additional $52.5 needs to be paid. To be precise, the company paid the $75 in tax, that's what the franking credit refers to.

On the 2nd dividend, tax is $171.43 * 30 = $51.43. But you paid $51.43 so you pay no extra or get no rebate. 

The way you work out the franking credit is to work backwards to what the money was worth in the company's hands before they paid tax and distributed it as a dividend. Lets say the company has $100 to pay in dividends before they pay the company tax on it. 

Since the company pays tax at 30%, after they pay their tax, there is just $70 to distribute and that is the dividend you receive and your statement should indicate that there is a $30 franking credit attached to it (the tax already paid).

This is a fully franked dividend, so to get from the dividend amount to the franked amount, multiply by 3/7. (if it was 50% franked, multiply 50% of the dividend amount by 3/7)

What the dividend imputation system is trying to do is to eliminate double taxation of dividends. Since, as a shareholder, you own a portion of the company, you have already paid tax on the company's profits via company tax and then when they distribute all or part of the net profit after tax, you shouldn't be taxed on it again via personal tax on your dividends.

So what the system strives to do is to get you to pay tax on the company pre-tax profit at your marginal rate and rebate you for whatever tax the company has paid. So using the example above, by adding the dividend amount and franking credit to your accessible income, you are adding the company's pre-tax profit (that is to be distributed as dividends, e.g. $100 in the above example) to your accessible income as if you had received the pre-tax profit as a dividend (instead of the net). You then calculate the amount of tax at your marginal rate that you must pay on that as if you had received that pre-tax amount as a dividend. So if you are on 15%, the tax you must pay is $15. The final step is to rebate you the amount of tax the company has already paid ($30), so you get $15 ($15-$30) back. 

So for fully franked dividends, if your marginal rate is under 30%, you get a rebate, at 30% it is neutral to you and above 30% you must pay a bit more. 

Without being too pedantic about it, there is a small gotcha. Since the franking credit is added back into your accessible income, any other calculation that is based on your accessible income will also be affected (e.g. medicare surcharge or perhaps some entitlements)


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## VeryGreen (6 February 2013)

Sorry to bump an old thread.

I was searching the forums trying to find information on Franked dividend's. I found the information in this thread very helpfull so thank you for that. In case its not obvious from the handle I've chosesn, I am very green when it comes to shares. I'm trying to learn though.

So I have this nagging question on franking. Its a pretty easy one.

Whats the advantage of a company paying the 30c tax in the dollar as opposed to giving me $1.30 and letting me pay the tax?

I mean if they are paying 30c and I only owe 15c then I get 15c back?

I'm obviously missing something here. 

bellenuit mentioned that there is a gotcha at the end of his post. This has lead me to believe that the amount the company pays in tax is pretty much just dropped back onto your total taxable income and you then calculate the tax you owe. I just dont see how this is advantages. Please, please, enlighten me cause I am baffeled!


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## bellenuit (6 February 2013)

VeryGreen said:


> Sorry to bump an old thread.
> 
> I was searching the forums trying to find information on Franked dividend's. I found the information in this thread very helpfull so thank you for that. In case its not obvious from the handle I've chosesn, I am very green when it comes to shares. I'm trying to learn though.
> 
> ...




I'll try to explain using my figures, as your's are not quite the way it works. This is a very general explanation, so things are a bit more complex than my explanation.

Lets say the company earns $1 in profit. The ATO taxes companies at 30%, so the company must pay the ATO $0.30. That means they do not have $1 to distribute to shareholders as dividends, just $0.70. (So that should answer your first question as to why they do not pay $1.30).

You are the only shareholder in the company and have just one share, so you get a dividend of $0.70, should the company decide to pay out all its after tax profits as dividends. 

Now if you are on the 15% tax rate and there wasn't dividend imputation, you would pay $0.105 tax on the $0.70 dividend, leaving you with $0.595 to put in the bank. 

But as a shareholder, you are the owner of the company and that original $1 in profit is really yours to begin with. But after the company tax was paid and your own personal tax was paid, you ended up with just $0.595 of the original $1. So effectively the tax rate (company + yours) on the $1 profit is 40.5% by the time it gets into your hands. This was seen to be very unfair, as the $1 was taxed twice.

Dividend imputation means that the distributed profits should only be taxed once, using the personal rate of the shareholder.

So when the dividend is paid to you, it will be a $0.70 dividend with a $0.30 franking credit. You will get $0.70 cents in cash.  However, when you do your tax return, you add back the franking credit and add the full $1 dollar to your taxable income. So this means the ATO is treating the original $1 in profit the company made as being made by you (even though they only distributed the after tax amount of $0.70 to you). They then calculate the tax on that $1 using your personal rate (15%) and calculate you have to pay $0.15 in tax on that. But the final step is to rebate you the amount of tax the company paid ($0.30 = franking credit), so instead of paying $0.15 tax you get a rebate of $0.15 ($0.15 - $0.30). So when you add the tax rebate of $0.15 which you get back from the ATO to the $0.70 dividend you got as a dividend, you have banked $0.85.

So the original $1 in profit the company made results in you receiving $0.85. This means that it was effectively taxed at just 15%, your personal tax rate. The company paid $0.30, but the ATO gave back $0.15 of that to you. You own the company, so the net effect is that company profits distributed as dividends end up being taxed in the hands of the shareholder at the marginal rate of that shareholder. 

Dividend imputation is definitely an advantage to the shareholder even if they are on high marginal tax rates such as 45% say. Without it, they would pay $0.315 tax on the $0.70 dividend, leaving them with just $0.385 (which means that the $1 profit had $0.615 taken out in tax by the time it got to the shareholder, =61.5% tax). With dividend imputation, if you calculate above as I have done, the shareholder in this case will pay $0.15 tax on the $0.70 dividend with $0.30 franking credit. So he will received a net amount of $0.55 after he received the $0.70 dividend but pays back $0.15 tax to the ATO. The $0.55 net proceeds in his hands of the original $1 profit means that profit has been taxed at 45%, the marginal tax rate of the shareholder.

You still might validly ask why do they bother to tax the company at all and just let them distribute the $1 profit untaxed to the shareholder. The net effect to the shareholder in that case would be exactly the same as with dividend imputation. There are several reasons for that. One is that some companies do not pay dividends and retain all their profits, or some only pay part of their profits in dividends. So any profits not distributed would result in a tax loss to the ATO (they apply no tax and if it's not distributed as a dividend, the shareholder also pays no tax). Another reason is that only Australian residents (possibly NZ depending on the tax agreement) can take advantage of dividend imputation. So if the $1 profit went untaxed as a $1 dividend to a foreign shareholder, the ATO would get nothing in tax from that shareholder. He would pay his tax on the $1 dividend to his country of residence.


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## VeryGreen (6 February 2013)

bellenuit said:


> You still might validly ask why do they bother to tax the company at all and just let them distribute the $1 profit untaxed to the shareholder. The net effect to the shareholder in that case would be exactly the same as with dividend imputation. There are several reasons for that. One is that some companies do not pay dividends and retain all their profits, or some only pay part of their profits in dividends. So any profits not distributed would result in a tax loss to the ATO (they apply no tax and if it's not distributed as a dividend, the shareholder also pays no tax). Another reason is that only Australian residents (possibly NZ depending on the tax agreement) can take advantage of dividend imputation. So if the $1 profit went untaxed as a $1 dividend to a foreign shareholder, the ATO would get nothing in tax from that shareholder. He would pay his tax on the $1 dividend to his country of residence.




Thanks bellenuit!

You made it a lot clearer. That last part was pretty much what I was asking. I could not see why the system was introduced. I thought that it sounded like a complex way to tax that dollar but of course it needs to be taxed before being distributed overseas and needs to be taxed fully even if only a portion of the profiet is passed on.

I'm satisfied now that the system is necessary from the ATO's point of view but I still need to investigate how the share holder actually benifits. I've heard people say its a good part of their tax stratagey but from what I can see... it doesn't actually help you minimize tax. I guess if you were on 15% tax rate and you had enough franked shares you could reduce your tax to next to nothing? Oh I think I just answered my own question...


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## So_Cynical (6 February 2013)

VeryGreen said:


> I've heard people say its a good part of their tax stratagey but from what I can see... it doesn't actually help you minimize tax. I guess if you were on 15% tax rate and you had enough franked shares you could reduce your tax to next to nothing? Oh I think I just answered my own question...




Buy some property trusts and or infrastructure stocks that pay distributions that have no franking credits  its painful paying the tax on those distributions from out of your pocket...give me franking credits any day, tax paid dividends.


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## skc (6 February 2013)

VeryGreen said:


> I'm satisfied now that the system is necessary from the ATO's point of view but I still need to investigate how the share holder actually benifits. I've heard people say its a good part of their tax stratagey but from what I can see... it doesn't actually help you minimize tax. I guess if you were on 15% tax rate and you had enough franked shares you could reduce your tax to next to nothing? Oh I think I just answered my own question...




You are correct. The shareholder would be theoretically be indifferent whether he receives $1 unfranked dividend or 70c franked dividend. Franking credit does not help you reduce tax. It is a tax that the company has already paid on your behave. 

Of course, if two stocks are both paying 6% dividend but one is fully franked while the other is unfranked, the fully franked dividend has more value. 

Another perculiar thing about fully franked dividends is the share price behaviour at ex-dividend. Observe how share prices drop off most usually by the franked dividend amount on ex-div, rather than the gross up amount. The price behaviour suggests as if franking credit has no actual value... (I think it has something to do with the 45-day rule). So in practice, getting a 70c fully franked dividend is usually a little bit better than getting a $1 unfranked dividend, since the share price only drops by 70c vs the full $1.


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## bellenuit (7 February 2013)

VeryGreen said:


> Thanks bellenuit!
> 
> You made it a lot clearer. That last part was pretty much what I was asking. I could not see why the system was introduced. I thought that it sounded like a complex way to tax that dollar but of course it needs to be taxed before being distributed overseas and needs to be taxed fully even if only a portion of the profiet is passed on.
> 
> I'm satisfied now that the system is necessary from the ATO's point of view but I still need to investigate how the share holder actually benifits. I've heard people say its a good part of their tax stratagey but from what I can see... it doesn't actually help you minimize tax. I guess if you were on 15% tax rate and you had enough franked shares you could reduce your tax to next to nothing? Oh I think I just answered my own question...




A good way to look at it is to compare receiving a $0.70 fully franked dividend to $0.70 in bank interest if you are on a 15% marginal tax rate. Using my example above, for the FF dividend you will get an additional rebate from the tax office of $0.15, so the dividend delivers a net of $0.85 to you. For the $0.70 interest, you will pay an addition $0.105 tax at year end, so it just delivers a net of $0.595. 

It will always be better than bank interest or unfranked distributions no matter what marginal rate you are on.


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## VeryGreen (7 February 2013)

Thanks everyone,

This has been very helpfull. Now I have a rough understanding of franked div's I have to move onto the next subject 

You people are the best.


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## PinguPingu (9 February 2013)

Franking credits have always slightly confused me, but from reading this thread it would appear they favour people in the lowest tax thresholds/none at all? So, me, if I earned under 18,000 would get the entire franking credit back after tax, and if I used up just under 5k, could get a very nice refund at tax time?


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## sydboy007 (10 February 2013)

The best thing to remember with dividend income is it's the grossed up yield that's important.  Too many people get tied up chasing fully franked dividends, when they could be earning a higher income from a partially franked dividend.

To make it clear a 4% fully franked dividend comes out at 5.71% grossed up.  If you could get a 6.5% unfranked dividend then that is the higher income yield.


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## sydboy007 (10 February 2013)

PinguPingu said:


> Franking credits have always slightly confused me, but from reading this thread it would appear they favour people in the lowest tax thresholds/none at all? So, me, if I earned under 18,000 would get the entire franking credit back after tax, and if I used up just under 5k, could get a very nice refund at tax time?




They benefit everyone in the same way.

If you have $100 in franking credits that will offset $100 in tax you would need to pay.  If you don't have any tax to pay, the Govt will give you the money back.  We all get our tax reduced by $100


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## hhvinhh (25 February 2013)

sydboy007 said:


> They benefit everyone in the same way.
> 
> If you have $100 in franking credits that will offset $100 in tax you would need to pay.  If you don't have any tax to pay, the Govt will give you the money back.  We all get our tax reduced by $100




Thanks everyone for the info.

Just want to ask if I have 365 stock, its dividend is 0.11 per share, dividend yield is 3.5% and 100% franking.

So dividend should be $40.15, and the franking credit should be $ 17.21 right? 

If i earn around 40k, i need to pay additional tax for dividend right? ( $40.15 + $17.21) ( 0.325) - $17.21 = $ 18.64 - 17.21 = 1.43, and it will result in a loss?

P.S. Tax rates in 2012-13
$37,001 - $80,000
$3,572 plus 32.5c for each $1 over $37,000


Sorry a bit confused


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## McLovin (25 February 2013)

hhvinhh said:


> Thanks everyone for the info.
> 
> Just want to ask if I have 365 stock, its dividend is 0.11 per share, dividend yield is 3.5% and 100% franking.
> 
> ...




Your calculation is correct. I'm not sure how you reached the conclusion you will have a loss?

$17.21 (30% of the gross amount) has already been paid in tax. As your marginal rate is 32.5% you will only have to pay an additional 2.5% in tax, which equals $1.43.


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## hhvinhh (25 February 2013)

McLovin said:


> Your calculation is correct. I'm not sure how you reached the conclusion you will have a loss?
> 
> $17.21 (30% of the gross amount) has already been paid in tax. As your marginal rate is 32.5% you will only have to pay an additional 2.5% in tax, which equals $1.43.




Thanks for your quick reply McLovin.

Silly me. So the net position should be $40.15 - $ 1.43 = $38.72 right?


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## McLovin (25 February 2013)

hhvinhh said:


> Thanks for your quick reply McLovin.
> 
> Silly me. So the net position should be $40.15 - $ 1.43 = $38.72 right?




Yep.


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## Muschu (30 April 2013)

Hi

Can someone help with this please?

With a dividend which was paid on 11/4, what is the earliest I can sell the stock and retain the franking credits?

With thanks

Rick


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## McLovin (30 April 2013)

Muschu said:


> Hi
> 
> Can someone help with this please?
> 
> ...




You have to have held the shares for 45 days. If on the 11/4 you have held the shares 45 days then you can sell then. You don't need to wait until the cash amount is paid to you, once the stock is ex dividend (assuming you've held for 45 days) you can sell it and still get the divvie + franking credits.


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## Muschu (30 April 2013)

McLovin said:


> You have to have held the shares for 45 days. If on the 11/4 you have held the shares 45 days then you can sell then. You don't need to wait until the cash amount is paid to you, once the stock is ex dividend (assuming you've held for 45 days) you can sell it and still get the divvie + franking credits.




Thx ML. I had these shares for much longer than 45 days before the divie was paid on 11/4.  However I was under the impression that I had to hold them for a minimum number of days after that. Not so?

Thx for the quick response.


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## McLovin (30 April 2013)

Muschu said:


> Thx ML. I had these shares for much longer than 45 days before the divie was paid on 11/4.  However I was under the impression that I had to hold them for a minimum number of days after that. Not so?
> 
> Thx for the quick response.




Nope. Once you've held them "at risk" (ie they can't be hedged) for 45 days, you're free to sell them whenever and still get whatever franking credits have been distributed to you.


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## Muschu (10 October 2013)

Can I just check something?

45 calendar days or 45 working [market open] days?  I assume it is the former?

Many thanks 

Rick


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## McLovin (10 October 2013)

Muschu said:


> Can I just check something?
> 
> 45 calendar days or 45 working [market open] days?  I assume it is the former?
> 
> ...




Hey Rick

You assume correctly, it's 45 calendar days.


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## Muschu (10 October 2013)

McLovin said:


> Hey Rick
> 
> You assume correctly, it's 45 calendar days.




Many thanks McLovin


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## 13ugs13unny (10 October 2013)

McLovin said:


> Hey Rick
> 
> You assume correctly, it's 45 calendar days.




But not including the days bought / sold 
Might be wrong, but i think im right.


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## ROE (10 October 2013)

13ugs13unny said:


> But not including the days bought / sold
> Might be wrong, but i think im right.




Yup all calculation even for capital gain doesn't include the day you buy and sell so add 2 more days
If unsure I always add a couple days to be sure to be sure


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## pixel (10 October 2013)

Muschu said:


> Hi
> 
> Can someone help with this please?
> 
> ...




Unless I'm very much mistaken, it's not the date of payment that matters, but the day on which the share traded ex-dividend.
The 45-day rule also applies only if your total annual dividends exceed $5,000.
I any case, franking credits can NOT be claimed if an entity reports a tax loss for the FY.


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## skc (10 October 2013)

pixel said:


> The 45-day rule also applies only if your *total annual dividends exceed $5,000.*




45-day rule for total annual franking credits >$5000, not total *dividend*.



> However, under the small shareholder exemption this rule does not apply if your total franking credit entitlement is below $5,000, which is roughly equivalent to receiving a fully franked dividend of $11,666 (based on the current tax rate of 30% for companies)




http://www.ato.gov.au/Individuals/I...You-and-your-shares-2012-13/?default=&page=11



pixel said:


> I*n* any case, franking credits can NOT be claimed if an entity reports a tax loss for the FY.




Not sure what you meant by that?


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## pixel (10 October 2013)

skc said:


> 45-day rule for total annual franking credits >$5000, not total *dividend*.
> http://www.ato.gov.au/Individuals/I...You-and-your-shares-2012-13/?default=&page=11
> Not sure what you meant by that?




Thanks for the correction, skc. My mistake.

My comment about tax losses referred to hypotheticals, where the costs of setting up or running a business leads to tax losses that exceed taxable income.


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## McLovin (10 October 2013)

pixel said:


> My comment about tax losses referred to hypotheticals, where the costs of setting up or running a business leads to tax losses that exceed taxable income.




Then there'd be no franking credits available. Afterall, FC's only represent tax already paid.


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## bigdog (5 February 2019)




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## sptrawler (6 February 2019)

I love the look silly Billy is giving Bowen, "now make sure you give all the bad news, I don't want you leaving anything for me".
I wouldn't mind losing the franking credits, if all super funds lost them, but to give Industry Funds the franking credits is just outrageous. IMO


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## Smurf1976 (6 February 2019)

sptrawler said:


> I wouldn't mind losing the franking credits, if all super funds lost them, but to give Industry Funds the franking credits is just outrageous. IMO



Plus the non-super issues too.


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## PZ99 (6 February 2019)

bigdog said:


> View attachment 91930



That is a very bad mistake. Most political parties plan at least two elections ahead. That's why Kim Beazley lost his job years ago. Labor knew they would win the 2007 election but were unconvinced about 2010 - so they replaced Kim with Rudd and we know what happened there.

This looks quite similar - smug arrogance which will prove costly. If a policy has merit - sell it.


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## SirRumpole (6 February 2019)

PZ99 said:


> That is a very bad mistake. Most political parties plan at least two elections ahead. That's why Kim Beazley lost his job years ago. Labor knew they would win the 2007 election but were unconvinced about 2010 - so they replaced Kim with Rudd and we know what happened there.
> 
> This looks quite similar - smug arrogance which will prove costly. If a policy has merit - sell it.





Labor has worked out that the people most affected by this are Coalition voters anyway, and are doing the same thing that Howard told Labor voters when he introduced Workchoices.

That was disastrous for him, but I think the Coalition's time is up anyway.


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## bigdog (6 February 2019)

Promises by Billy


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## sptrawler (6 February 2019)

Smurf1976 said:


> Plus the non-super issues too.



It is just giving taxpayer funded advantage to union run funds, which in itself isn't a bad thing, but it is when it creates an unlevel playing field with public money.
Add to that, taking the franking credits off the stay at home mum, yet giving them to people who qualify for welfare.
FFS where the hell are they taking society, they say middle class welfare is bad, well they are making welfare that attractive who the hell would want to be middle class?
My rant for the month, unfortunately it is early in the month, so there is a possibility of another.


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## tinhat (6 February 2019)

The problem with this country is that there are too many old people!


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## PZ99 (6 February 2019)

tinhat said:


> The problem with this country is that there are too many old people!



That problem is only going to get much worse in the future.


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## sptrawler (6 February 2019)

tinhat said:


> The problem with this country is that there are too many old people!



Given time, you will understand.


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## bigdog (6 February 2019)

Apart from screwing retirees for franking credits, these folk are in the trough for bigger things and spending our money!

Pick which one has been seen at Macdonald's!


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## Bill M (6 February 2019)

sptrawler said:


> taking the franking credits off the stay at home mum, yet giving them to people who qualify for welfare.
> FFS where the hell are they taking society, they say middle class welfare is bad, well they are making welfare that attractive who the hell would want to be middle class?






tinhat said:


> The problem with this country is that there are too many old people!






bigdog said:


> Apart from screwing retirees for franking credits, these folk are in the trough for bigger things and spending our money!




The problem in this country is the welfare mentality. It really gets me when I see unemployed 18 to 25 year olds sitting around in parks drinking and talking about their dole collections. For Gods sake, get off your friggin ar$es and try to get a job and do something for yourselves. If only you spent as much time knocking on doors as you do hanging around in the park you might just strike it lucky.

It was quoted on TV the other night that 50% of all Australians get some sort of Government payments. My God that is terrible.

Why is it "us bad old people" can come out of the woodwork at the drop of the hat and work in jobs we have never done before? How is that? It's because we never give up and we are not afraid of hard work. Right now I am making a few dollars for non descript, non qualified work because I pushed myself to be proactive. Honestly I am just sick of hearing that young people can't get a job. There is plenty out there if you try, saw an older couple in their 70's the other day going out cutting lawns for a few $$. Says it all, just too easy to say the world is against me and spend all day chasing free money from Centerlink.... Now I got something off my chest too.


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## Bill M (6 February 2019)

I guess what I am trying to say is that I am against the theft of franking credits from older folk who have saved and invested all their life to give it to those who will not get of their ar$es for free. Rant Over!


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## Smurf1976 (6 February 2019)

Bill M said:


> I guess what I am trying to say is that I am against the theft of franking credits from older folk who have saved and invested all their life to give it to those who will not get of their ar$es for free



Agreed although I’m a strong supporter of the concept of welfare for those who, due to whatever unfortunate circumstances, genuinely need it.

There’s a big difference between “tried but failed” versus “can’t be bothered to try”.


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## SirRumpole (6 February 2019)

Smurf1976 said:


> Agreed although I’m a strong supporter of the concept of welfare for those who, due to whatever unfortunate circumstances, genuinely need it.
> 
> There’s a big difference between “tried but failed” versus “can’t be bothered to try”.




I didn't think that there was "free welfare" these days for able bodied people.

The spiel from the government is that people have to be actively looking for work, studying or doing volunteer work to qualify for the dole.

That sounds fine in theory, but how well it is policed is another matter, and what resources are required to adequately police it ?


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## PZ99 (6 February 2019)

Bill M said:


> The problem in this country is the welfare mentality. It really gets me when I see unemployed 18 to 25 year olds sitting around in parks drinking and talking about their dole collections. For Gods sake, get off your friggin ar$es and try to get a job and do something for yourselves. If only you spent as much time knocking on doors as you do hanging around in the park you might just strike it lucky.
> 
> It was quoted on TV the other night that 50% of all Australians get some sort of Government payments. My God that is terrible.
> 
> Why is it "us bad old people" can come out of the woodwork at the drop of the hat and work in jobs we have never done before? How is that? It's because we never give up and we are not afraid of hard work. Right now I am making a few dollars for non descript, non qualified work because I pushed myself to be proactive. Honestly I am just sick of hearing that young people can't get a job. There is plenty out there if you try, saw an older couple in their 70's the other day going out cutting lawns for a few $$. Says it all, just too easy to say the world is against me and spend all day chasing free money from Centerlink.... Now I got something off my chest too.



Agreed. But only one thing.... some people cutting lawns and doing other stuff are earning cash money and *still* claiming full welfare. That's the rub


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## sptrawler (6 February 2019)

SirRumpole said:


> I didn't think that there was "free welfare" these days for able bodied people.
> 
> The spiel from the government is that people have to be actively looking for work, studying or doing volunteer work to qualify for the dole.
> 
> That sounds fine in theory, but how well it is policed is another matter, and what resources are required to adequately police it ?




Silly Billy said he is getting rid of work for the dole and the welfare card, apparently it makes it all too hard, for those on welfare.


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## Bill M (6 February 2019)

SirRumpole said:


> The spiel from the government is that people have to be actively looking for work, studying or doing volunteer work to qualify for the dole.
> 
> That sounds fine in theory, but how well it is policed is another matter, and what resources are required to adequately police it ?



I walk a lot for exercise so I get about a bit. It is always the same young people hanging around so they are repeat offenders. On my walks I have never ever seen a work for the dole crew, never. Not cleaning graffiti, not cleaning trains and certainly not pulling weeds in parks so I don't think the work for the dole happens anymore but I would love to be corrected. If it does go on I would like to know where and what they do and how well it is enforced, but I doubt it happens.


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## Bill M (6 February 2019)

sptrawler said:


> Silly Billy said he is getting rid of work for the dole and the welfare card, apparently it makes it all too hard, for those on welfare.



I saw on TV where they have trialled it. They interview a recipient and she said "how dare they tell me how to spend my money". Yeah right, talk about entitlement. How about this, you can go and earn your own money and then you can spend it on whatever you like. They did a poll on this and 56% of respondents said they agree with welfare card and 44% disagreed. It seems to me logical that welfare recipients should not be able to use tax payers money on alcohol and cigarettes, but some people are against this, why?


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## bigdog (6 February 2019)

https://www.afr.com/business/bankin...will-dodge-labor-franking-hit-20190204-h1au8z

*Bell Potter says high-yield switch will dodge Labor franking hit*
By *Jonathan Shapiro*
Feb 4, 2019 — 11.00pm

Labor's proposed policy to stop paying cash refunds for surplus franking credits to investors with no income will drive up the cost of capital for banks and force investors into high-yield bonds that could significantly reduce the potential tax saving.

That is the view of research analysts at Bell Potter who have told clients that by switching out of bank hybrid securities to a listed high-yield corporate bond fund that does not benefit from franking, investors who will lose thousands of dollars of refunds under the policy can actually maintain the same income.

Bell Potter's hybrid analyst, Damien Williamson, showed clients an example of how investors could potentially maintain the same cash income after tax by shifting half of a $600,000 investment in Westpac's Capital Notes, which pay a margin of 5.25 per cent, into Neuberger Berman's listed global high-yield bond fund, which also pays a margin of 5.25 per cent.

A $600,000 investment in the Westpac hybrid would generate $22,050 in cash and $9450 in franking credits. A self-managed superannuation fund would then pay 15 per cent tax (or $4725), which would offset half the franking credits, resulting in a $4725 surplus rebate and an after-tax income of $26,775.

Under Labor's proposal the rebate would fall away, leaving a lower $22,050 of cash income after tax for the SMSF.

*Portfolio shift*
But Bell Potter said that if that investor shifted half its portfolio, or $300,000, into the high-yield bond fund with the same 5.25 per cent yield, the gross income would remain the same at $31,500. This would comprise $11,025 of cash and $4725 in franking credits from the Westpac hybrid, and $15,750 of cash interest from the high-yield fund.

The franking credit entirely would offset the $4725 of tax payable to ensure a zero tax bill.

But the cash income of $26,775, made up of $11,025 from the hybrid and $15,750 from the bond fund, would allow the investor to maintain the same after-tax income than if the policy was not changed.

The analysts therefore argued that as investors shifted into other investments the potential savings for the government may be less than assumed while the reduced attractiveness of hybrids to some investors would increase the margin banks would have to pay for this funding.

"Reallocating investments away from the capital structure of banks to an offshore high-yield income trust is likely to increase bank funding/capital costs," Mr Williamson said.

"This investment strategy also brings into question the quantum of revenue this policy will generate."

*Thousands affected*
Fixed-income research firm BondAdviser estimated the policy change would directly impact more than 1 million individuals, 200,000 SMSFs and more than 200,000 pensioners.

Morningstar's John Likos said in a note at the time that the policy will "strike hardest at the heart" of the bank Tier I hybrid market.

"These hybrid securities are often fully franked, a strong selling point for retail investors, particularly self-managed super funds, or SMSFs."

A change in the policy therefore could reduce the attractiveness of hybrids and at the time the policy was announced in March 2018, margins on hybrid securities were sold off to the point where margins increased by nearly a quarter of a percentage point.

As the opinion polls point towards a Labor victory the change appears more likely.

Labor leader Bill Shorten said the party was "not for turning" on the policy while shadow treasurer Chris Bowen told those destined to lose out because of it "are perfectly entitled to vote against us".


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## HelloU (6 February 2019)

sptrawler said:


> I love the look silly Billy is giving Bowen, "now make sure you give all the bad news, I don't want you leaving anything for me".
> I wouldn't mind losing the franking credits, if all super funds lost them, but to give Industry Funds the franking credits is just outrageous. IMO




the truth is that ALL super funds will be subject to the same rules ....... the noisy issue of refund loss is to do with smsf's in pension phase that pay nil tax, and do not have any members in accumulation phase to help use the credits. It is the current trustee/member chosen structure of these smsf funds that will not allow the refund to occur 

(not sayin good or bad, that is the facts).  

what else ....

i have never understood a society where old white men get together over many years to create a welfare system (takes maybe 10 years of laws and rules and long lunches and committees and policies and elections) .......and then take such pride in beating up the users of that system. 

my point - old white men made that welfare system ....not the blokes in the park.


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## Bill M (6 February 2019)

HelloU said:


> the truth is that ALL super funds will be subject to the same rules ....... the noisy issue of refund loss is to do with smsf's in pension phase that pay nil tax, and do not have any members in accumulation phase to help use the credits. It is the current trustee/member chosen structure of these smsf funds that will not allow the refund to occur




It's not only about smsf's, it's also about the little old lady who has nothing but the state pension and a 100K in CBA shares. Currently the grossed up divi is about 9%. It goes something like 70% franked income and 30% in franking credits. She receives back at tax time all of those franking credits which gives her a $9,000 grossed up dividend, or an income of 9K. Under the Labor proposals she looses the franking credits and now will only receive $6,000. Why should the old lady take a $3,000 pay cut? What did she do in her life to deserve that? It isn't fair.


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## Knobby22 (6 February 2019)

The savings will be massive (billions and billions) and lead to big tax cuts which they will roll out to win the election. they also will be able to raise the pension.
No other country in the world taxes a company and then gives the tax back to the owners of the shares.
the idea was to not be double taxed.
Most of the money goes to very few people who are already extremely wealthy. Everyone always trots out the little old lady thing but most of this money goes to a few thousand people.

As a working taxpayer I have to say that I understand where Bill is coming from.

(Cowers and waits for bricks).


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## sptrawler (6 February 2019)

HelloU said:


> the truth is that ALL super funds will be subject to the same rules ....... the noisy issue of refund loss is to do with smsf's in pension phase that pay nil tax, and do not have any members in accumulation phase to help use the credits. It is the current trustee/member chosen structure of these smsf funds that will not allow the refund to occur
> 
> (not sayin good or bad, that is the facts).
> 
> ...




Well if the TRUTH is that ALL super funds will be subject to the same rules, SMSF with 50% off the members in accumulation and 50% in pension, they should be able top apply the same logic.


Source: https://www.intelligentinvestor.com.au/industry-super-funds-1887411
Copyright © 1998 - 2016 InvestSMART Publishing Pty Ltd ABN 12 108 915 233. No part of this website, or its content, may be reproduced in any form without the prior consent of The Intelligent Investor Publishing Pty Ltd.

The reason why industry and retail superannuation funds would not be impacted is because they are pooled funds (with hundreds of thousands of members), so any franking credits received can be applied across the whole group to offset tax. By contrast, those running a self-managed super fund in pension mode are generally not paying tax, and cannot apply the credits to others.


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## HelloU (6 February 2019)

hey
i think u need way more in accum than 50% to make it work ..... i do not know the numbers on that (expect too many variables to get numbers) ..........this is cos there is a $25K limit on non-conc contributions ....so u need a heap of those $25K contributing members.

i was just sayin that the rules will apply equally .... but agree it will be very very difficult for smsf to compete. for the trustees to grapple with if it comes .......


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## HelloU (6 February 2019)

Bill M said:


> It's not only about smsf's, it's also about the little old lady who has nothing but the state pension and a 100K in CBA shares. Currently the grossed up divi is about 9%. It goes something like 70% franked income and 30% in franking credits. She receives back at tax time all of those franking credits which gives her a $9,000 grossed up dividend, or an income of 9K. Under the Labor proposals she looses the franking credits and now will only receive $6,000. Why should the old lady take a $3,000 pay cut? What did she do in her life to deserve that? It isn't fair.



(no idea what a state pension is ....so will assume u mean govt old age pension)

all welfare recipients will still get the refund ......


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## sptrawler (6 February 2019)

Knobby22 said:


> .
> 
> As a working taxpayer I have to say that I understand where Bill is coming from.
> 
> (Cowers and waits for bricks).




You won't always be and if you think Bill will stop at pensioners, you're dreaming.

They are already finding problems with the pension, it is being indexed every 6 months, it is already better returns, than those who lose it are receiving.


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## Smurf1976 (6 February 2019)

Knobby22 said:


> Most of the money goes to very few people who are already extremely wealthy. Everyone always trots out the little old lady thing but most of this money goes to a few thousand people.




So why introduce a change which harms the little old lady whilst retaining the full value of franking credits for high income earners in the top tax bracket?

Doing the reverse and making franking credits means tested would seem a very much fairer approach and more effective at achieving the implied objective.


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## sptrawler (6 February 2019)

HelloU said:


> hey
> i think u need way more in accum than 50% to make it work ..... i do not know the numbers on that (expect too many variables to get numbers) ..........this is cos there is a $25K limit on non-conc contributions ....so u need a heap of those $25K contributing members.
> 
> i was just sayin that the rules will apply equally .... but agree it will be very very difficult for smsf to compete. for the trustees to grapple with if it comes .......




They can't justify giving the franking credits, to those in industry funds, just because they are in a large fund.
Those in the industry fund, that are in the pension phase, still pay no tax.
The outcome would still be illegal and discriminatory, it is no better than what the banks were doing, shows how short memories are.
If they bring it in, they will have to make all super funds have a breakdown of accounts, or it will be open to legal challenge. IMO


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## satanoperca (6 February 2019)

Hi Bill, can you help me as I am trying to help my retired parents with this as they are upset about these proposal by Labor.

They have shares in their SMSF which they do not pay tax on as they are in pension phase. If franking credits are removed under your example they will receive $9K which they pay no income tax on if all shares are held in the SMSF. So franking credits is a zero end game in this case.

But if Mom has $100K in her personal name, she will be $3K worse off, as she will not get the franking credits.

Have I got something wrong?


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## sptrawler (6 February 2019)

Smurf1976 said:


> So why introduce a change which harms the little old lady whilst retaining the full value of franking credits for high income earners in the top tax bracket?
> 
> Doing the reverse and making franking credits means tested would seem a very much fairer approach and more effective at achieving the implied objective.




Doing what they said they would do, last election makes more bloody sense, tax self funded pensions above a certain amount.
The fact is they want everyone in Industry funds, so they all have a job post politics, can't wait to see them choke on Hayne's recommendations.


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## HelloU (6 February 2019)

sptrawler said:


> They can't justify giving the franking credits, to those in industry funds, just because they are in a large fund.
> Those in the industry fund, that are in the pension phase still pay no tax.
> The outcome would still be illegal and discriminatory, it is no better than what the banks were doing, shows how short memories are.



above my pay grade ..... but the trust structure is what allows the transfer to occur .....but the trust must have a tax liability for the tax credits to be of any use ....the tax liability is what the smsf (pension phase) does NOT have.
The rules will still be the same - the problem is that the smsf structure is too tight (not enough members). that is what the trustees may need to investigate .........


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## sptrawler (6 February 2019)

HelloU said:


> above my pay grade ..... but the trust structure is what allows the transfer to occur .....but the trust must have a tax liability for the tax credits to be of any use ....the tax liability is what the smsf (pension phase) does NOT have.
> The rules will still be the same - the problem is that the smsf structure is too tight (not enough members). that is what the trustees may need to investigate .........



It will still be illegal for a fund to apportion credits, to accounts that are in the pension phase, it will give an uncompetitive advantage to large funds.
Like I said it is just as bad as the behaviour of the Banks.
It will be interesting, I can see the ACCC being dragged into it.
What the structure is too tight to allow uncompetitive and illegal behaviour.


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## HelloU (6 February 2019)

sptrawler said:


> It will still be illegal for a fund to apportion credits, to accounts that are in the pension phase, it will give an uncompetitive advantage to large funds.
> Like I said it is just as bad as the behaviour of the Banks.
> It will be interesting, I can see the ACCC being dragged into it.
> What the structure is too tight to allow uncompetitive and illegal behaviour.



dunno ....above my pay grade
i have not seen one financial analyst that has said that industry funds will not be able to wash the credits through the fund to help their pension phase members??? happy to be corrected

my comments are not about the fairness of the proposal but about the way it will work ......


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## Bill M (6 February 2019)

HelloU said:


> *all welfare* recipients will still get the refund ......



All of them? So if the threshold (cut out) of the pension is 800k in assets for a couple and they have 790K and collect $20 per fortnight from a Government pension then all imputation credits from their 790K worth of investments will be refunded at tax time. Is that correct?


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## sptrawler (6 February 2019)

HelloU said:


> dunno ....above my pay grade
> i have not seen one financial analyst that has said that industry funds will not be able to wash the credits through the fund to help their pension phase members??? happy to be corrected
> 
> my comments are not about the fairness of the proposal but about the way it will work ......



Going back to your first quote on the subject:
_The truth is that ALL super funds will be subject to the same rules._
_
Nothing could be further from the *TRUTH*._


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## HelloU (6 February 2019)

Bill M said:


> All of them? So if the threshold (cut out) of the pension is 800k in assets for a couple and they have 790K and collect $20 per fortnight from a Government pension then all imputation credits from their 790K worth of investments will be refunded at tax time. Is that correct?



(not been here much lately) ...yes, has this not been discussed on this forum?

mate, people on the dole will still get the refund (on the basis of what is known)


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## sptrawler (6 February 2019)

HelloU said:


> (not been here much lately) ...yes, has this not been discussed on this forum?
> 
> mate, people on the dole will still get the refund (on the basis of what is known)



Yes I brought it up, when it was mentioned earlier, just another stuff up.


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## HelloU (6 February 2019)

truth

if u currently get a refund of franking credits (for whatever reason) and are NOT on govt welfare, then u will lose the refund.

that is the current plan for this as i understand it.


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## sptrawler (6 February 2019)

HelloU said:


> truth
> 
> if u currently get a refund of franking credits (for whatever reason) and are NOT on govt welfare, then u will lose the refund.
> 
> that is the current plan for this as i understand it.



Unless you are in an Industry Fund or Large Retail fund, in which case the rules will be bent, to give you the franking credits. lol


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## bigdog (6 February 2019)

I complete a tax return and will not be effected if franking credits are cancelled!

https://www.afr.com/brand/rear-window/furphys-abound-in-franking-credits-debate-20190203-h1asmq

*Furphys abound in franking credits debate*
By *Myriam Robin* and *Joe Aston*

There's been abundant hysteria about* Bill Shorten's* policy to abolish cash refunds on excess franking credits. But ACTU chief of staff *Ben Davison* has taken the cake, after spending much of the weekend railing on Twitter against opposition to Labor's pledged tax reform.

Davison has been particularly exercised by a case study in Melbourne's _Herald Sun _of retiree Jean, who gets $29,810 in dividends from her self-managed super fund and $130,000 of income from other assets each year. On those same numbers but under Labor's incoming system, she would lose nearly $13,000 a year in cash refunds. Davison observed that "retired Jean makes far more money than I do working full time, pays no tax (I pay tax), and gets $12,775 refunds on tax never paid".

Davison (and many others) fails to appreciate that Jean has already paid tax on every dollar of her input balance in income tax, and that every asset held in it pays tax again on every dollar of profit. While she was working, franking credits allowed her (as they will still do, Ben) to avoid double taxation on corporate income by offsetting it against personal income. Labor is taking that benefit from retirees, and retirees alone.

We're not bagging the policy. We doubt *Peter Costello* ever intended to forego so much revenue. Treasury and the ATO certainly didn't.

And for the record, Davison's employer is a non-profit which contributes no tax whatsoever. And this wasn't his only wrong-headed contribution. He also accused fund manager* Geoff Wilson*, leading the charge against the policy, of standing to lose personally from it.

But unlike Jean, Geoff is still working. Like Ben, Geoff can absolutely continue to benefit from the tax benefits of fully franked dividends.

What's more, Davison (a star MBA graduate of Melbourne University) notes that Wilson "owns the majority of [WAM Capital]". Nonsense. Davison has confused the director share interests with the LIC as a whole. Of the 713 million shares on issue, Wilson owns less than 0.04 per cent of them.

Then Davison claims Wilson's fund WAM Capital's largest holdings are in companies that pay fully franked dividends, a factor, he suggests, in the LIC's declining share price from late 2018. "The market is aware that WAM Capital, regardless of Mr Wilson's personal exposure to this policy, might have a problem," Davison states. If Davison had pulled up the All Ordinaries while he was looking at WAM Capital's performance, he might have twigged that it was far from alone in having a crummy few months.

As for holding companies which pay fully franked dividends, that's not proof of direct self-interest, it's proof of a capital steward advocating his customers' interests. Sure, one begets the other, but that's a critical distinction.

It is true that the 30 years of stable tax treatment since *Paul Keating*'s 1987 budget has encouraged retirees to invest in Australian equities. That's benefited every money manager and their superannuants (including those operated by the union movement Ben toils for). Presumably the ACTU hasn't forgotten that guy PJK, or his economic deregulation ally *Bill Kelty*? We're pretty sure the latter's bust, at least, stands in the lobby.


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## Bill M (6 February 2019)

satanoperca said:


> Hi Bill, can you help me as I am trying to help my retired parents with this as they are upset about these proposal by Labor.
> 
> They have shares in their SMSF which they do not pay tax on as they are in pension phase. If franking credits are removed under your example they will receive $9K which they pay no income tax on if all shares are held in the SMSF. So franking credits is a zero end game in this case.
> 
> ...



I have just been told by HelloU that it will not affect the little old lady with the small share portfolio in her own name if she is collecting a government pension. So it seams to me it is only SMSF's that are affected. The real question is do you trust Labor not to interfere further with retirees savings? When the noise first started about this I made a clear comment that it should stay the way it is. 

It will affect me so I do not want it go ahead. I draw a pension from super tax free. But I also have a small portfolio of shares outside of super to supplement my private pension income. Currently I earn around the tax free threshold (18K a year) in income. Because I am under the threshold I get all my franking credits rebated. I think I got back about $3,000 this tax year. Because I am not on welfare, under the Labor proposal I will lose that $3,000 year tax refund. Why would I vote for them to steal $3,000 from me? This is the big question.


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## Toyota Lexcen (6 February 2019)

Disability support pension is what long term welfare recipients are on. Disgrace.

Got a neighbour on it. Just turned 60, does weeding, mows lawns, chops wood, walks, talks, builds things.

Subsidized housing.

Been on it most of life. Very confronting when you get up and go to work and get zero benefits from GOV. 

Sit down with someone at Centre link and they will tell you how many weeks until you get assistance.


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## SirRumpole (6 February 2019)

Bill M said:


> Why would I vote for them to steal $3,000 from me? This is the big question.




You wouldn't, but would you have voted for them if they did not change the franking credit system ?

This is Labor's gamble, they are hitting people who would most likely not vote for them and giving the dough to those who would.

No different to Howard's Work"choices" policy.


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## Toyota Lexcen (6 February 2019)

Bill your money outside of super is the target. Or the non working partner .

It will go to the scabs in public housing and welfare recipients


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## satanoperca (6 February 2019)

Bill M said:


> Because I am under the threshold I get all my franking credits rebated. I think I got back about $3,000 this tax year. Because I am not on welfare, under the Labor proposal I will lose that $3,000 year tax refund. Why would I vote for them to steal $3,000 from me? This is the big question.




They are not stealing and if you are in pension phase it should not effect you, talk about being entitled


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## Bill M (6 February 2019)

satanoperca said:


> They are not stealing and if you are in pension phase it should not effect you, talk about being entitled



As that is outside of super it gets taken away from me as *I am not on welfare*. Anything that is taken away is theft in my books. I have paid taxes all my life. The companies I invest in are paying me franked dividends with imputation credits. In other words everything has ALREADY been taxed and my 3K will not be refunded. This is **** policy, Labor wants to take my 3k tax refund away from me because they deem me to be the top end of town on 18k a year income outside of super. That is what is laughable, 18 friggin k. This is not super rich! Why would anyone in their right mind vote for these clowns? I will finish where I started, *I am not on welfare*.


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## Bill M (6 February 2019)

Toyota Lexcen said:


> Bill your money outside of super is the target. Or the non working partner .
> 
> It will go to the scabs in public housing and welfare recipients



Absolutely.


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## bigdog (6 February 2019)

My friends on govt pensions love cancelling the franking credits!
-- raising taxes and they are paying zero!!

I imagine for retired SMSF funds in excess if $1.6 million will pay tax on extra income and be able to claim the franking credits
-- if right, the super rich are getting it good and the poorer SMSF funds under $1.6 million are getting slugged!

We need to see govt. pensions taxed especially the many politicians on pensions in excess of $200,000 where many have new employment

Andrew Robb is now working for the Chinese on $800,000. He helped setup the companies operating in Australia and now employ him

Joe Hockey in on a pension and being paid as US ambassdor

Please correct me if I am wrong with over the treatment for the $1.6 million SMSF

For folk that do not have a SMSF and own shares will be slugged if they do not prepare a tax return


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## PZ99 (6 February 2019)

Bill M said:


> As that is outside of super it gets taken away from me as *I am not on welfare*. Anything that is taken away is theft in my books. I have paid taxes all my life. The companies I invest in are paying me franked dividends with imputation credits. In other words everything has ALREADY been taxed and my 3K will not be refunded. This is **** policy, Labor wants to take my 3k tax refund away from me because they deem me to be the top end of town on 18k a year income outside of super. That is what is laughable, 18 friggin k. This is not super rich! Why would anyone in their right mind vote for these clowns? I will finish where I started, *I am not on welfare*.



Bill, if you are on $18k a year (which then becomes $15k a year because of loss of credits) are you likely to have to then claim some welfare to recover the $3k a year loss?


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## Bill M (6 February 2019)

PZ99 said:


> Bill, if you are on $18k a year (which then becomes $15k a year because of loss of credits) are you likely to have to then claim some welfare to recover the $3k a year loss?



No, I can only get low income tax offsets. I'm not 67 (pension age) and can not claim anything on welfare anyway.


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## sptrawler (6 February 2019)

PZ99 said:


> Bill, if you are on $18k a year (which then becomes $15k a year because of loss of credits) are you likely to have to then claim some welfare to recover the $3k a year loss?



Every retiree, I know who are above the pension cutoff limit, are spending to get under it.
The latest one his wife has qualified for part pension, yet he hasn't.
But it works on combined assets and combined income, shows how disjointed the ATO is, he is going to see the ombudsman. 
In the end the only ones Bill will catch, are the workers who buy shares, in their non working spouses name. 
Then I guess he will have to come after the workers, because the majority of elderly, will be on the pension.
Also they will get their franking credits back, what a hoot.
The dumb pricks, should have stuck with taxing pensions and or earnings, above a certain amount.


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## sptrawler (6 February 2019)

Wouldn't it be just easier for Labor to say, we will tax pensions above $50K at 15% and pensions above say $75K at 30%. That cancels the franking credit, at an income level.
But that still wouldn't force SMSF to close down, and pay a retail or industry fund, management fees.
So Labor wouldn't wear that.IMO


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## sptrawler (6 February 2019)

sptrawler said:


> Wouldn't it be just easier for Labor to say, we will tax pensions above $50K at 15% and pensions above say $75K at 30%. That cancels the franking credit, at an income level.
> But that still wouldn't force SMSF to close down, and pay a retail or industry fund, management fees.
> So Labor wouldn't wear that.IMO




The other problem with taxing pensions, above a certain level, it would be too easy to tax the politicians' pension's then.


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## Smurf1976 (6 February 2019)

sptrawler said:


> But that still wouldn't force SMSF to close down, and pay a retail or industry fund, management fees.



Most policies I can follow the logic in even if I don't agree with them as such.

I must say though that this policy of Labor's does have a certain "smell" to it and that's a worrying sign from a probable future government that hasn't even been elected yet.

I'm not at all keen on the Liberals but I'm not keen on this policy of Labor's either and that's about principles and long term effects far more than anything of a personal nature. There is quite simply no need to hit the lower half whilst retaining full benefits of the scheme for high income earners, that's just wrong.


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## sptrawler (6 February 2019)

Smurf1976 said:


> Most policies I can follow the logic in even if I don't agree with them as such.
> 
> I must say though that this policy of Labor's does have a certain "smell" to it and that's a worrying sign from a probable future government that hasn't even been elected yet.
> 
> I'm not at all keen on the Liberals but I'm not keen on this policy of Labor's either and that's about principles and long term effects far more than anything of a personal nature. There is quite simply no need to hit the lower half whilst retaining full benefits of the scheme for high income earners, that's just wrong.



The problem is smurf most aren't seeing it for what it is, a direct hit on middle income Australians.
There is no point debating it, most just can't see it, but they will once it is enacted. IMO
Once a middle income earner ,wants to start investing, the penny will drop.


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## Smurf1976 (6 February 2019)

Putting aside the arguments for or against this policy and acting on the assumption that it will be implemented, I think the best we can do as investors is focus on the broader implications.

Anyone have thoughts as to the impacts on broad asset classes or individual companies?


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## Bill M (7 February 2019)

Smurf1976 said:


> Anyone have thoughts as to the impacts on broad asset classes or individual companies?



I will have to re-think all of my franked dividend paying stocks outside of super. I invest in quite a few hybrid securities as they pay regular distributions and are less volatile than shares. Several of these are out there, some examples are CBA PERLS series or Capital Notes from other banks and companies. Nearly all of these products were marketed as products that paid fully franked dividends with franking credits to the stock holder, a rebate of franking credits to low income earners if you are one. Now if the Labor party steal these imputation credit rebates then I have to re-think all of these investments as they are a bit too risky for the lower return.

It will most likely drive down prices of the hybrid securities as the risk is not worth the reward. Then the banks and other companies will need to pay more of a margin for these issues in the future which will come at a higher cost otherwise no one will invest in them.  Why should I buy a hybrid security to get 5% (with all their risks) with the franking credits lost forever when I can buy a Corporate Bond with a 7% payment with no franking or any losses? Low income earners come off worse with this policy, it is going to hit those that need it most. It has not been thought through.


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## sptrawler (7 February 2019)

Smurf1976 said:


> Anyone have thoughts as to the impacts on broad asset classes or individual companies?



I personally, would be staying away from anything, involving residential real estate.


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## tinhat (7 February 2019)

Bill M said:


> I will have to re-think all of my franked dividend paying stocks outside of super. I invest in quite a few hybrid securities as they pay regular distributions and are less volatile than shares. Several of these are out there, some examples are CBA PERLS series or Capital Notes from other banks and companies. Nearly all of these products were marketed as products that paid fully franked dividends with franking credits to the stock holder, a rebate of franking credits to low income earners if you are one. Now if the Labor party steal these imputation credit rebates then I have to re-think all of these investments as they are a bit too risky for the lower return.
> 
> It will most likely drive down prices of the hybrid securities as the risk is not worth the reward. Then the banks and other companies will need to pay more of a margin for these issues in the future which will come at a higher cost otherwise no one will invest in them.  Why should I buy a hybrid security to get 5% (with all their risks) with the franking credits lost forever when I can buy a Corporate Bond with a 7% payment with no franking or any losses? Low income earners come off worse with this policy, it is going to hit those that need it most. It has not been thought through.




I've always favoured the superior dividends from owning bank shares over the capital notes and CBA PEARLS etc. Different risks of course.

My mum as a self funded retiree has done well out of the Costello/Howard largesse. She was able to stuff all her life savings into a SMSF while avoiding paying tax in her final working years and for years has not paid a cent in tax and has sat back and received a cheque from the ATO every year on top of that! She hasn't had to pay a cent in income tax for years to help pay for the training and education of the kids that are going to have to pay tax to pay for the public goods and services like health that she is going to keep using for years. 

My attitude has always been milk it while you can because it can't last. When these overly generous concessions were being made earlier this century all the smart commentators and economists were saying it can't last.

Right now NAB, for example is yielding 8%. Risky? Of course, you can't expect 8% return without carrying some exposure to cyclical risk. Plenty of opportunity out there to make a few bucks from your savings.


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## Zaxon (7 February 2019)

tinhat said:


> My mum as a self funded retiree has done well out of the Costello/Howard largesse. She hasn't had to pay a cent in income tax for years to help pay for the training and education of the kids that are going to have to pay tax to pay for the public goods and services like health that she is going to keep using for years.




As it reads, your mother is saving the taxpayer a fortune by not collecting the pension, instead paying her own way. In addition, she's paying GST on everything - that's tax - and getting no concession on registration, rates, gas and power, saving us all even more money.


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## sptrawler (7 February 2019)

Zaxon said:


> As it reads, your mother is saving the taxpayer a fortune by not collecting the pension, instead paying her own way. In addition, she's paying GST on everything - that's tax - and getting no concession on registration, rates, gas and power, saving us all even more money.



Like I said earlier people can't see it, take $3,000 franking credit off her, give her $20,000 in pension. As long as she leaves $250k in assett's can't be all bad, who knows tinhats mum may end up better off?
I know when I get back from the up coming cruise, I'm buying a new bike.
Also if Musk gets his act together, I may beat VC to buy one.


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## CNHTractor (7 February 2019)

It's  the inequality of the proposed policy. The ALP is purportedly aiming at the wealthy. This proposed policy does not do this.

Either cancel franking credits altogether (bad), or cap the amount that can be claimed (fairer, but still bad policy) rather than be biased to essentially SMSFs.

Arrogant labour, putting out a class warfare policy


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## bigdog (8 February 2019)

*Points in article include:*

Davidson, who is a professor of economics at RMIT University and an adjunct fellow at the Institute of Public Affairs,* found that 56 per cent of those who receive the cash rebate are women, 68 per cent of whom are over the age of 60, and 47 per cent of whom are either single or widowed.*

*Labor is coming after apple pie-baking nanas, not monocle-wearing monopoly men.*

*Inter-generation inequity is a legitimate concern but the best way to resolve it is to reduce government spending and pay down the debt, not hit nanna with another tax.
--------------------------------------------------------------*

https://ipa.org.au/publications-ipa/the-dividends-of-ageing

*Labor Is Coming After Apple Pie-Baking Nanas*
Daniel Wild 1 February 2019

On Thursday, Labor’s Shadow Treasurer Chris Bowen said something that a politician is never supposed to utter. At least not in public.

In response to those who will face higher taxes under Labor’s proposed changes to Australia’s dividend imputation system, Bowen said they were “entitled to vote against us”.

On one level this is unobjectionable as it describes the democratic process — don’t like one mob, just vote for the other.

But the reason that comment has rubbed so many people up the wrong way is it shows that one side of politics just doesn’t care about those who would be hurt by their policies.

It sends a message that if you are not going to vote for Labor then Labor will not govern for you.

So much for the idea of the national interest. But Bowen and Labor should care more. Under their latest proposal to hike up taxes, cash refunds for retirees for so-called excess franking credits from shares they hold would be abolished.

This would result in some $55 billion in extra taxes being levied on Australian retirees.

It would also partially undo an important feature of Australia’s tax system. Without franking credits corporate income would effectively be taxed twice.

First corporate profits are taxed at the company tax rate, which is 30 per cent for large businesses. This is close to the highest corporate tax rate in the world.

Second, businesses pay dividends out of income which has already been taxed.

This means when shareholders pay tax on those dividends, they are paying tax on income which has already been taxed. The franking credit system gets around this by allowing the corporate tax rate to be deducted from the shareholder’s individual tax rate.

This means the extra tax paid above the corporate rate is the difference between the corporate rate and the shareholder’s marginal tax rate.

The rub is that many retirees do not work, or work very little, so they have a low or zero marginal income tax rate. This means that the difference between the company rate and their marginal rate can be negative. In this case the shareholder receives a rebate. And it is this rebate that Labor wants to eliminate.

Labor likes to conjure up images that only old rich men chomping on cigars have the know-how to exploit this feature of Australia’s tax system.

But recent analysis by Professor Sinclair Davidson revealed some interesting facts.

Davidson, who is a professor of economics at RMIT University and an adjunct fellow at the Institute of Public Affairs, found that 56 per cent of those who receive the cash rebate are women, 68 per cent of whom are over the age of 60, and 47 per cent of whom are either single or widowed.

Labor is coming after apple pie-baking nanas, not monocle-wearing monopoly men.

What is worse, though, is that the changes would be retrospective meaning they would apply to decisions already made.

This is a particular problem for retirees given that plans for retirement are made over a period of years and decades. Not that the Coalition government can complain.

It did, after all, propose its own retrospective tax hikes on self-funded retirees through the superannuation system in 2016.

If the Coalition was committed to lower taxes it would have more credibility in opposing Labor’s tax hikes.

Perhaps one positive to come out of Labor’s proposed tax hike, though, is it has brought up concerns about inter-generation political warfare.

Opponents of Labor’s proposed tax hike claim Labor is setting up a battle between older self-funded retirees and younger working families.

This criticism has some merit but it misses the broader and intense inter-generations battle that has been raging for some time.

For years it has been the Baby Boomers who have dominated politics. There are a lot of them and they are for the most part wealthy.

They have benefited greatly from the differential tax treatment of superannuation, rising asset prices from low interest rates, and rising property values.

At the same time as the boomers have amassed great wealth, their younger cohorts in Generation Y (or Millennials born between 1977-1995) and Generation Z (born from 1996 onwards) have been left with some $500 billion in gross government debt at the Commonwealth level alone.

And every last cent of this debt will need to be paid back by today’s younger Australians through higher future taxes.

Inter-generation inequity is a legitimate concern but the best way to resolve it is to reduce government spending and pay down the debt, not hit nanna with another tax.


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## Logique (8 February 2019)

Let's be honest, what Labor is proposing is little more than white collar crime by government edict. 
Hard times may be ahead for the aged and self funded.

We haven't even heard Labor's policy on private health insurance. I'm tipping it's not going to be good news for policy holders. It's no longer the Labor of Hawke and Keating.

A run on the aged pension. A run on public hospitals. A run on the national borders.


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## galumay (8 February 2019)

LOL!! Lets be honest what Labor is proposing iis an end to a rort, a form of wealthfare that has no place in a fair society. If receiving franking credit rebates make you self funded, then someone on the dole is a self funded non-worker. 

There is so much arrant nonsense spread about ending this rort, calling it a tax, saying its a return to double tax, implying it will impact pensioners, luckily most voters can see right through the self interested outrage from high wealth, asset rich, boomers squealing like stuck pigs over the proposed loss of their welfare payment.


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## sptrawler (8 February 2019)

galumay said:


> LOL!! Lets be honest what Labor is proposing iis an end to a rort, a form of wealthfare that has no place in a fair society. If receiving franking credit rebates make you self funded, then someone on the dole is a self funded non-worker.
> 
> There is so much arrant nonsense spread about ending this rort, calling it a tax, saying its a return to double tax, implying it will impact pensioners, luckily most voters can see right through the self interested outrage from high wealth, asset rich, boomers squealing like stuck pigs over the proposed loss of their welfare payment.




The problem is IMO, the way they are doing it, if you can't see that then you are in for some shocks as you go through life.
They aren't ending it, they are still giving it to those on welfare, so by your definition that's triple dipping.
If they wanted a sensible effective way of efficiently dealing with it, they would just introduce tax scales to super pensions, then at a certain level of pension the rate goes to 30% which in effect cancels the franking credit.
But that isn't what this whole thing is about, self funded people do so because they don't trust other people managing their money, Labor want them in the industry funds so they can fatten the gravy train.
That is all this is about, self interest.
If you can't see that, well like I said, you will be at the receiving end. IMO


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## sptrawler (8 February 2019)

sptrawler said:


> I personally, would be staying away from anything, involving residential real estate.



Well smurf, the results are starting to show. From your post #91

http://www.thebull.com.au/articles/a/80052-rea-group-flags-election-led-listings-drop.html


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## Logique (8 February 2019)

galumay said:


> LOL!! Lets be honest what Labor is proposing iis an end to a rort, a form of wealthfare that has no place in a fair society. If receiving franking credit rebates make you self funded, then someone on the dole is a self funded non-worker.
> 
> There is so much arrant nonsense spread about ending this rort, calling it a tax, saying its a return to double tax, implying it will impact pensioners, luckily most voters can see right through the self interested outrage from high wealth, asset rich, boomers squealing like stuck pigs over the proposed loss of their welfare payment.



B/S. Spare us the social justice posturing. Electricity Bill and Chris Bowen could still claim the franking credit, but not Nanna on $18k ann. That's Labor's fair society.


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## tinhat (8 February 2019)

I have a vague recollection of reading somewhere a few years ago an argument that it would be cheaper to just give everyone that is at retirement age the aged pension (without limiting eligibility through an asset or income test) compared to the amount of tax concessions that the government gives to retirees. The entire tax system needs to be reformed but no government has had the nerve to do it.


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## sptrawler (9 February 2019)

tinhat said:


> I have a vague recollection of reading somewhere a few years ago an argument that it would be cheaper to just give everyone that is at retirement age the aged pension (without limiting eligibility through an asset or income test) compared to the amount of tax concessions that the government gives to retirees. The entire tax system needs to be reformed but no government has had the nerve to do it.



That retirement system you are talking about, is the system we used to have, the same as NZ, U.K and Canada, but our pollies screwed it up as usual, from what I've read.
Everyone pays in, everyone gets a basic pension, if you invest in super it is taxed as income.

All that is happening now is, the politicians are trying to find any worker with money and take it off them. Dumb $hit.
How Labor can say with a straight face, they are helping the middle income earner, by stopping negative gearing on established cheap houses and only allowing it on new builds WTF.

How the hell can a worker pay for their own home, and then build a brand new rental property, what planet are they on? The rich can do that, workers have no chance.

Then even if the worker could afford to do it, when they sell it, they will get hit with more capital gains? The only ones who could afford that scenario are developers, who work on flipping.
Then to really take the cake, labor is going to give the developers the money to do it, as long as they give cheaper rent than the market average. So use tax payers money, to put people in the rent trap.
FFS if the Libs suggested it, there would be an uproar.
What I can't believe is how people are supporting it, it is mind boggling, the lemming like attitude of people. Is there any wonder our education standards are falling, they have to, so the population can be sold this crap.


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## Kremmen (9 February 2019)

galumay said:


> LOL!! Lets be honest what Labor is proposing iis an end to a rort, a form of wealthfare that has no place in a fair society.



Currently, any individual earning $35k per year, salaried or from investments, is taxed $3192. The proposed scheme would mean someone earning that from dividends would be taxed $10500.

Being charged over 3 times as much tax as someone else with the same income, just because of the source, is anything but fair.


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## Smurf1976 (9 February 2019)

galumay said:


> LOL!! Lets be honest what Labor is proposing iis an end to a rort, a form of wealthfare that has no place in a fair society.



Someone earning $500K loses nothing at all from the proposed changes.

Someone earning $100K also loses nothing.

Someone earning $20K loses quite a bit.

Assuming in all cases they own shares which pay franked dividends.

So it's cutting welfare for those in the bottom half but who still have investments whilst keeping it keeping it fully intact for those at the top.

So if you're upper class then it's business as usual. If you're lower class then you're not affected since you won't own any shares anyway. If you're middle class then you're being given a push toward becoming lower class*

This is a good idea because?

If we're considering franking credits, which represent tax already paid, to be a form of welfare and there's an aim to remove that then wouldn't it be more sensible to remove it from high income earners instead of removing it from low income earners? A welfare scheme that only applies to high income earners seems a rather odd approach to me. 

*Not that I like the concept of "class" but it seemed the best way to make the point.


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## Knobby22 (9 February 2019)

I'm missing something because that is incorrect. 
You know the guy that's running the online petition collects well over 2 million a year from franking credits which he will lose if the change occurs.
I don't know if he works for a living, probably not.


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## basilio (9 February 2019)

How about some facts around the Labour party proposal to abolish refunds of unused imputation credits ? 
Have a close look at just which people are getting the $5b plus a year by creative accounting.

*The real story of Labor’s dividend imputation reforms*
http://insidestory.org.au/the-real-story-of-labors-dividend-imputation-reforms/


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## basilio (9 February 2019)

How about some facts around the Labour party proposal to abolish refunds of unused imputation credits ? 
Have a close look at just which people are getting the $5b plus a year by creative accounting.

*The real story of Labor’s dividend imputation reforms*
http://insidestory.org.au/the-real-story-of-labors-dividend-imputation-reforms/


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## Zaxon (9 February 2019)

Knobby22 said:


> You know the guy that's running the online petition collects well over 2 million a year from franking credits which he will lose if the change occurs.
> I don't know if he works for a living, probably not.




"Franking credits" and "franking credit refunds" are not the same thing. If your dividends are pre-taxed at 30%, when it comes to paying your own tax on that money, you're credited for that 30% already paid - franking credits. If your tax rate is lower, you're refunded the difference (currently).

No millionaire is getting franking credit refunds.


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## basilio (9 February 2019)

Zaxon said:


> "Franking credits" and "franking credit refunds" are not the same thing. If your dividends are pre-taxed at 30%, when it comes to paying your own tax on that money, you're credited for that 30% already paid - franking credits. If your tax rate is lower, you're refunded the difference (currently).
> 
> *No millionaire is getting franking credit refunds* .



  !!!

Really Zaxon ? *Sorry that is just not the case. *In fact the  entire case for the Labour party moving on this issue is the realisation that $5b a year is being given as franking credit refunds overwhelmingly to very wealthy people.

It is true that their nominal taxable income is less than $18k a year.  That doesn't change what is behind those carefully constructed figures.

And guess what ? Older people are now paying far less tax than their peers 20 years ago. Check out the analysis  I quoted in my previous post.







For more than a decade, superannuation tax concessions have been absurdly generous to older people on high incomes. They are one of the major reasons older households pay less income tax in real terms today than they did twenty years ago, even though their workforce participation rates and real wages have jumped.

These age-based tax breaks help to explain why the proportion of seniors paying tax almost halved in twenty years, from 27 per cent in 1995 to 16 per cent in 2014. The rise of these “taxed-nots” coincides with the introduction of the Senior Australian Tax Offset in 2000, and tax-free super withdrawals in 2007.

http://insidestory.org.au/the-real-story-of-labors-dividend-imputation-reforms/


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## Toyota Lexcen (9 February 2019)

would be good if they used data from independent source


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## basilio (9 February 2019)

Toyota Lexcen said:


> would be good if they used data from independent source




It is an independent source.  It comes from the ABS Survey of Income and Housing 2014-15. They have just used it in their analysis.

*Does it strike you as intriguing that 43%  of the wealthiest 10% of Australians over 65  have an official taxable income less than $18k ?*  Does that help explain concern where most of $5b a year of imputation refunds is going ?

Because it certainly isn't being used by the poor buggers in the bottom 40-50% of the wealth/income scale.


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## willy1111 (9 February 2019)

basilio said:


> It is an independent source.  It comes from the ABS Survey of Income and Housing 2014-15. They have just used it in their analysis.
> 
> *Does it strike you as intriguing that 43%  of the wealthiest 10% of Australians over 65  have an official taxable income less than $18k ?*  Does that help explain concern where most of $5b a year of imputation refunds is going ?
> 
> Because it certainly isn't being used by the poor buggers in the bottom 40-50% of the wealth/income scale.




So basically it is because couples can hold upto $3.2m in Super between them and not have to pay any tax on the earnings from the $3.2m if held in pension mode.

So why not just change the tax rules to do with Super? Just apply marginal tax rates on the Super earnings once it goes into pension mode.


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## Toyota Lexcen (9 February 2019)

Couldn't find any reference to ABS only to Grattan Report.


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## Zaxon (9 February 2019)

Toyota Lexcen said:


> Couldn't find any reference to ABS only to Grattan Report.




The same Grattan Institute who says "Most Australians will retire with enough savings".


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## basilio (9 February 2019)

Toyota Lexcen said:


> Couldn't find any reference to ABS only to Grattan Report.




Go to the original  story  and look under the pictures of the graphs. The first two state* Survey of Income and Housing 2015. *That is the ABS report. Gratten Institute used that survey for the information in their report. The creation of the graphs to reflect the information in the survey would be the work of the Gratten researchers 
They don't have the capacity  or the independent credibility to  undertake such a survey. 

http://www.abs.gov.au/household-income
http://insidestory.org.au/the-real-story-of-labors-dividend-imputation-reforms/


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## basilio (9 February 2019)

willy1111 said:


> So basically it is because couples can hold upto $3.2m in Super between them and not have to pay any tax on the earnings from the $3.2m if held in pension mode.
> 
> So why not just change the tax rules to do with Super? Just apply marginal tax rates on the Super earnings once it goes into pension mode.




Not sure Willy. Certainly that could be the case for a number of people. On the other hand there may be other Trust or Company structures that have enabled people to hold exceptional wealth and a great lifestyle but report a minimal tax position.

Perhaps other posters can offer insight into how this can be done ?


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## Toyota Lexcen (9 February 2019)

They have made their own interpretation of the survey? Why don’t they credit ABS correctly for it?

Seems suspicious to not credit it correctly


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## Brickie2 (9 February 2019)

Toyota Lexcen said:


> They have made their own interpretation of the survey? Why don’t they credit ABS correctly for it?
> 
> Seems suspicious to not credit it correctly





basilio said:


> Go to the original  story  and look under the pictures of the graphs. The first two state* Survey of Income and Housing 2015. *That is the ABS report. Gratten Institute used that survey for the information in their report. The creation of the graphs to reflect the information in the survey would be the work of the Gratten researchers
> They don't have the capacity  or the independent credibility to  undertake such a survey.
> 
> http://www.abs.gov.au/household-income
> http://insidestory.org.au/the-real-story-of-labors-dividend-imputation-reforms/



This report 14-15 Yr, all before the 1.6 Million limit imposed so figureswill be all wrong.


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## Smurf1976 (9 February 2019)

basilio said:


> It is an independent source.  It comes from the ABS Survey of Income and Housing 2014-15. They have just used it in their analysis.
> 
> *Does it strike you as intriguing that 43%  of the wealthiest 10% of Australians over 65  have an official taxable income less than $18k ?*  Does that help explain concern where most of $5b a year of imputation refunds is going ?



That suggests we should outlaw whatever method is being used by the wealthy to hide their income.

It doesn’t seem like a good reason to punish Joe Average blue collar worker who owns some shares and managed funds outside of super and plans to retire at age 55 as a self funded retiree.

They’re the ones I’m concerned about and there are quite a few such people.

I know a few and they’ve all worked hard I see no reason to be punishing them now whilst continuing to allow the full value of franking credits to those on high incomes.

Those who do use tricks to avoid tax will, of course, just find another way to go about it.

But sure, if they want to close loopholes for the wealthy then go right ahead but I see no reason to hit those who’ve simply worked in ordinary jobs and invested to support themselves in retirement without relying on welfare.


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## SirRumpole (9 February 2019)

Smurf1976 said:


> but I see no reason to hit those who’ve simply worked in ordinary jobs and invested to support themselves in retirement without relying on welfare.





A refund of something not paid in the first place could be regarded as welfare.


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## Smurf1976 (9 February 2019)

SirRumpole said:


> A refund of something not paid in the first place could be regarded as welfare.



Shareholders are part owners of a company.

Company pays tax and, having done so, pays lower dividends than if the company had not paid tax. Ultimately company tax is paid by the owners of the company - shareholders.

Now what Labor proposes is:

High income earners - yes you can consider tax paid by the company on your behalf as tax already paid. So you won’t pay that tax a second time as income tax. Your total tax will be as per the progressive income tax scales.

Low income earners - no sorry but you can’t consider tax paid by the company on your behalf as tax already paid. This is only available to higher income earners. Your total tax will be higher than if you had earned the same money any other way.

If Labor truly believes that the income tax scales are inappropriate and that low income earners should pay more tax then why not just say so and adjust the rates?

The only logic I can see in this is if the real aim is to discourage ordinary middle and lower income workers from investing in anything other than a superannuation fund. So that stops those who’d retire early and so on from doing so.


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## Zaxon (9 February 2019)

SirRumpole said:


> A refund of something not paid in the first place could be regarded as welfare.




Think of it this way. A housewife, Kathy, works for BHP as a part time tea lady and earns $10k per year. BHP's accounting department takes out withholding tax (incorrectly).  At the end of the yeah, Kathy, who earns below the taxable threshold, gets her tax refunded in full.

Housewife Cathy, Kathy's sister, doesn't work but gets $10k per year in BHP dividends.  BHP has already paid tax on this dividend. Under the Labor's new law, Cathy, who earns below the taxable threshold, gets NO tax refunded.

Both earn $10k. One pays tax, the other doesn't.  This sounds fair to very few people.


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## Smurf1976 (9 February 2019)

Zaxon said:


> Both earn $10k. One pays tax, the other doesn't.  This sounds fair to very few people.



That's what it comes down to.

It doesn't affect me personally at this point in time but the policy seems extremely unjust to be applying vastly different rates of taxation to the same level of income on account of how it were gained so long as we're talking about legitimate employment or investments.

If they want to improve taxation then closing all the loopholes would seem much fairer. Stuff like multi-nationals not paying tax - hold them to account. Eg if their physical operation is really so unprofitable that no tax is payable then they should have no objection to government taking it off their hands for a token payment which reflects its complete lack of profitability. 

They'd only need to do that once and all of a sudden quite a few businesses will suddenly realise they're profitable after all and start paying tax I'm sure.


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## basilio (9 February 2019)

Smurf1976 said:


> High income earners - yes you can consider tax paid by the company on your behalf as tax already paid. So you won’t pay that tax a second time as income tax. Your total tax will be as per the progressive income tax scales.
> 
> Low income earners - no sorry but you can’t consider tax paid by the company on your behalf as tax already paid. This is only available to higher income earners. Your total tax will be higher than if you had earned the same money any other way.




Smurf you have mentioned a number of times your concern with what you see as unfair treatment of low income earners who somehow receive  credits for shares delivering fully franked  dividends they have managed to  have. This is vs High income earners who you see as getting full value for the shares.

I think you have misinterpreted/misunderstood the situation.
By definition a high income earner (ie taxable income $50-60k plus lol!)  will have a tax bill that will be reduced by the franking credits attached to the dividends. The situation of the high income person  getting a cash refund of the franking credits only happens when they have managed to reduce their income to less than $18k or the refund credits are so large they swamp whatever tax they might be liable for. That says they have  a substantial share portfolio yielding many thousands of dollars in credits.

Our very special low income earner  somehow has a real income (not creative accountancy work ) of  $30k a year but also has a share portfolio delivering him/her of thousands of dollars of franking credits. These are credits you suggest will be unfairly denied.

The facts are

1) There are *$5billion a year of franking credits (our taxes..)*  given out each year. The overwhelming amount is going to the people who have managed to  use this special loop hole to create tax structures that will enable such a lurk. Trying to keep such a system going because in theory a very few poorer investors will lose some credits doesn't make sense. One may as well put aside $30m and say " If you are in such a category and can prove so we will allow your credits"

2) *The other category of low income earners receiving franking  credits will be the partners and children of wealthy people.* If one is already making a ton of money then putting $300k of  bank shares in your (non working) wifes name is canny. She gets dividends which won't be taxed up to $20k AND will get the franking credits as well.  Sweet! And that is almost certainly part of the portion of non tax paying people receiving these credits.

The figures I produced earlier show just which part of the community is using this lurk to enrich themselves at the expense of the wider  public.  Trying to point to a hypothetical/mythical toilet cleaner on $40k losing some hundreds even thousands of dollars of franking credits as an excuse to keep this system is ridiculous.

_____________________________________________________________________
Having said that can you or anyone else  accurately demonstrate the problems that you believe will occur for  medium investors ? Perhaps it is these issues that can be recognised and tweaked.
And of course looking at the whole tax system for multinationals wouldn't hurt either..


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## basilio (9 February 2019)

Zaxon said:


> Think of it this way. A housewife, Kathy, works for BHP as a part time tea lady and earns $10k per year. BHP's accounting department takes out withholding tax (incorrectly). At the end of the yeah, Kathy, who earns below the taxable threshold, gets her tax refunded in full.
> 
> Housewife Cathy, Kathy's sister, doesn't work but gets $10k per year in BHP dividends. BHP has already paid tax on this dividend. Under the Labor's new law, Cathy, who earns below the taxable threshold, gets NO tax refunded.




Is that your work Zaxon or did you read it in one of one the BS propaganda pieces being thrown around by the financial advisors to the rich but "not paying tax" group.?

Kathy the tea lady* is working *and  earning less than $18k a year *has paid tax herself *during the year. When tax time comes she tots up her income and will get back *the tax she paid *because she is not liable for it.

Her "sister" (what a lovely touch) *has an investment i*n $200k of BHP shares which is yielding 5% (10k dividends) . She didn't pay any tax  in the financial year to get  a refund.  In fact her investment return of 5% is quite healthy thank you very much.  And of course she won't be paying any tax on these dividends (Thank you to her hubby and financial advisor who suggested this little deal)
But now you want the tax payer to chip in another *$3k* as well because after all that is what financial advisors are there to do isn't it ?


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## sptrawler (9 February 2019)

basilio said:


> Is that your work Zaxon or did you read it in one of one the BS propaganda pieces being thrown around by the financial advisors to the rich but "not paying tax" group.?




Well Bas, if he did, it isn't any worse than the BS, you threw up about all super could be passed on tax free.
So before you bad mouth someone else, get your own act together, not wanting to be personal.
But I just hate bullies.


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## HelloU (9 February 2019)

Zaxon said:


> Think of it this way. A housewife, Kathy, works for BHP as a part time tea lady and earns $10k per year. BHP's accounting department takes out withholding tax (incorrectly).  At the end of the yeah, Kathy, who earns below the taxable threshold, gets her tax refunded in full.
> 
> Housewife Cathy, Kathy's sister, doesn't work but gets $10k per year in BHP dividends.  BHP has already paid tax on this dividend. Under the Labor's new law, Cathy, who earns below the taxable threshold, gets NO tax refunded.
> 
> Both earn $10k. One pays tax, the other doesn't.  This sounds fair to very few people.




so both of those people had the same taxable income of $10,000 ........

but one of them took home the full $10K,
whilst the other took home $7K. 

that will be the new system - for identical people - where the exact same assessable incomes, the exact same deductions and so the exact same taxable incomes, will result in different amounts of after tax money in the pocket. 

Do people actually want that?
(unless peeps are about to argue that the tax scales for PAYE income should be different to the tax scales for investment earnings income?)

(the irony being that under the new system if Cathy -$7K lady - can get onto welfare then she keeps it all again)


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## sptrawler (9 February 2019)

basilio said:


> 2) *The other category of low income earners receiving franking  credits will be the partners and children of wealthy people.* If one is already making a ton of money then putting $300k of  bank shares in your (non working) wifes name is canny. She gets dividends which won't be taxed up to $20k AND will get the franking credits as well.  Sweet! And that is almost certainly part of the portion of non tax paying people receiving these credits.



What if that person, is a FIFO worker, so he spends a lot of time away and the wife looks after the kids?


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## HelloU (9 February 2019)

by basilio
*"But now you want the tax payer to chip in another $3k as well because after all that is what financial advisors are there to do isn't it ?"*
there is no "chip in" of anything

the amount you talk about forms part of the taxable income of that person. Taxable income is a term used by the tax office - for tax returns - to determine income tax.

the amount of income tax that is paid is determined from the taxable income by using a thing called a tax table.

the tax table is the device used to determine how much tax should be paid for a particular annual taxable income.

rather than a system where all tax is paid in a lump sum at the end of the year we use, in australia, a system where lots of small tax payments are made all through the year to the tax office - this is on the basis that if you pay too much through the year you can get the excess back ..... or similarly, if you did not pay enough then you must pay some more to square it up.

in fact, if you need to pay extra income tax then interest is sometimes added to the amount because that is considered to be a situation where you have "borrowed" from the tax payer for a while (so been in debit).this may be a case of "chipping in" by the tax payer, to carry your debt for a period, and is why interest is charged to the individual.

it is the paying back of the excess paid tax, with respect to taxable income, that is being discussed.


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## Zaxon (9 February 2019)

basilio said:


> Is that your work Zaxon or did you read it in one of one the BS propaganda pieces being thrown around by the financial advisors to the rich but "not paying tax" group.?






sptrawler said:


> So before you bad mouth someone else, get your own act together, not wanting to be personal.
> But I just hate bullies.




Basilio, every post you've directed to me, which started today, has been bullying and belittling.  Welcome to my ignore list.  You're my first and only.


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## sptrawler (9 February 2019)

SirRumpole said:


> A refund of something not paid in the first place could be regarded as welfare.



What like a Government pension?


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## Smurf1976 (10 February 2019)

basilio said:


> Smurf you have mentioned a number of times your concern with what you see as unfair treatment of low income earners who somehow receive  credits for shares delivering fully franked  dividends they have managed to  have. This is vs High income earners who you see as getting full value for the shares.



To clarify what I'm saying:

My concerns are in relation to what I'll call "ordinary workers" in that their income, taken over their working life thus far, hasn't been an order of magnitude greater than normal. So they're not bank CEO's and they're not internationally famous celebrities and so on. Normal people in normal jobs etc.

Depending on when you were born, superannuation is preserved until age 60. As such, it is an ineffective investment vehicle for money you may want to access prior to this time.

Some people will thus choose to save and invest outside of super in addition to having compulsory super. This maybe because they believe there's a credible chance they'll be forced to retire early due to whatever reasons or simply because they want to.

Regardless of their motive they are investing money they have already worked to receive, have paid the full rate of income tax on and they will also be paying income tax at their marginal rate on whatever income those investments produce whilst they are working. Plus any realised capital gains will also be taxed.

In doing so they will have excluded themselves from receiving the dole should they at any time be unemployed. Much the same with various other things.

Now if such a person does find themselves retired at age 53 for whatever reason and has zero income other than from their investments, which they bought with money that was already taxed, then to me it seems incredibly harsh to then tax the income of those investments at the company tax rate (30%) rather than at the individual's normal income tax rate.

From a purely personal perspective Labor's proposal has no immediate impact. I do however have investments outside super for the reasons I've mentioned. I've seen far too many people, of varying backgrounds and both genders, thrown on the unemployment scrap heap in their 50's to think it couldn't happen to me. Anyone who thinks they're bulletproof hasn't seen a recession.

Now if I did find myself needing to rely on my investments with no other income well suffice to say I could sure do without being heavily taxed at that time. I've already paid tax on the money invested, I'm already paying more tax because I've chosen to invest it rather than spend it and I've already done myself out of any potential welfare payments. The prospect of paying company tax rates on what's left, in the event life takes a turn for the worse and I really do have no other income, seems totally unreasonable given that in any other situation normal rates of income tax would apply to the same level of income.

As someone who has always sought to be financially self-sufficient and to not become reliant on welfare, and I include the aged pension in that, this policy looks awfully like it's motivated by politics and punishment rather than any rational thinking. 

Now if by chance I've misunderstood how this policy works then I'll stand corrected. Getting that info hasn't been straightforward and there's a lot of misinformation out there as with anything. That's my understanding of it though - if you've legitimately got no other income then Labor will in practice make your franking credits worthless meaning you're paying a 30% rate of tax on a low income.


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## HelloU (10 February 2019)

Smurf1976 said:


> To clarify what I'm saying:
> 
> My concerns are in relation to what I'll call "ordinary workers" in that their income, taken over their working life thus far, hasn't been an order of magnitude greater than normal. So they're not bank CEO's and they're not internationally famous celebrities and so on. Normal people in normal jobs etc.
> 
> ...




your understanding is correct on the application of this policy ...........with clarification of the last sentence.

you wrote* "if you've legitimately got no other income then Labor will in practice make your franking credits worthless meaning you're paying a 30% rate of tax on a low income".
*
If this same person can get welfare (dole, sickness, etc) then they will get the credits back (as well as getting the welfare payments.

i do not understand a government policy that introduces incentives for being on welfare.


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## basilio (10 February 2019)

sptrawler said:


> Well Bas, if he did, it isn't any worse than the BS, you threw up about all super could be passed on tax free.
> So before you bad mouth someone else, get your own act together, not wanting to be personal.
> But I just hate bullies.




I was sharp with Zaxon. Couple of points though.
1) I directly addressed the issues he raised. The two nominal women have quite different situations as I pointed out.
2) Yes I did think this particular example sounded very much like a point from a "stop the tax hike" story put out by Wilson and co. I could be wrong and in fact Zaxon has crafted it himself. That doesn't change, in my mind, the different situations which have been confabulated for the purpose of this discussion.

By the way my throwing up that super could be passed on tax free? I was quoting in good faith a story from the SMH. I wasn't saying it as my personal understanding.

I would like to know what the facts are. It is a serious mistake if Jenna Price has made  an error in her story. Poor research and weakens the argument.


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## Triple B (10 February 2019)

Is it possible to elect to not have the franking credits paid by the company? Therefore you receive the dividends 100% and deal with the tax at your marginal rate . Perhaps if this was a policy ,people on lower marginal rates could receive the franked part and pay no tax as they may be under the tax free threshold?
This also has an advantage of being able to re-invest the unfranked dividends on payment .
I can see that in the future companies may start to pay divs un franked if Labours plan succeeds.
You get your $ before the Govt does,,,,, always a good thing I reckon


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## Zaxon (10 February 2019)

Triple B said:


> Is it possible to elect to not have the franking credits paid by the company? Therefore you receive the dividends 100% and deal with the tax at your marginal rate .




No. Companies have taxation requirements set by ATO rules and accounting standards. The commonest source of unfranked dividends are REITS, since they distribute earnings from a trust and pass them straight onto you, and companies with overseas earnings.

This is other "fail" in Labour's proposed policy.  If you receive unfranked dividends, you pay at your marginal tax rate (outside of super), and if you're below 18K, you pay no tax.  If you receive franked dividends, then sorry, we've taken 30%, and you're not getting that back.


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## Triple B (10 February 2019)

So Companies are obligated to pay franking credits ? I thought it was their option ie they can choose to pay 100%,  50%  or 0%  @ 0% the company owner(shareholder pays 100% tax owed using marginal income tax rate.


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## willy1111 (10 February 2019)

Triple B said:


> So Companies are obligated to pay franking credits ? I thought it was their option ie they can choose to pay 100%,  50%  or 0%  @ 0% the company owner(shareholder pays 100% tax owed using marginal income tax rate.




My understanding...

Companies taxable income is $10m, they must pay $3m company tax to ATO.

This $3m can only be distributed to shareholders via fully franked dividends...otherwise it has absolutely no use to anyone whatsoever. If not used in current year it can be carried forward indefinitely.

The company can

a) pay a $7m unfranked dividend to shareholders. Shareholders receive $7m cash in bank account with no franking credits. Shareholder is taxed on $7m with no franking credits to deduct from tax they have to pay.

b) pay a $7m fully franked dividend to shareholders. Shareholders receive $7m cash in bank account and a $3m franking credit. Shareholder is taxed on $10m, and $3m franking credit is deducted from amount of tax they pay.


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## sptrawler (10 February 2019)

basilio said:


> I was sharp with Zaxon. Couple of points though.
> 1) I directly addressed the issues he raised. The two nominal women have quite different situations as I pointed out.
> 2) Yes I did think this particular example sounded very much like a point from a "stop the tax hike" story put out by Wilson and co. I could be wrong and in fact Zaxon has crafted it himself. That doesn't change, in my mind, the different situations which have been confabulated for the purpose of this discussion.
> 
> ...



I posted the facts Bas, the tax free component of your super, is passsed on tax free, the taxable component is taxed at 15% + medicare levy before it is distributed to the estate.

The post you put up was actually dishonest, if the reporter new the facts and if she didn't she shouldn't write a story on a subject she obviously has very little understanding of.

My guess is it was written to deceive, because even someone with a basic understanding,
 knows the basic rules.


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## Smurf1976 (10 February 2019)

Politics and arguments for or against this policy aside, the logical implications are that investments which pay franked dividends are about to lose capital value relative to those which pay unfranked dividends.

A classic case of taxation distorting the underlying market.

There are ways around it in practice, just don’t invest in anything paying franked dividends unless the yield is high enough to stack up, but the principle is just silly really.


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## So_Cynical (10 February 2019)

basilio said:


> Our very special low income earner  somehow has a real income (not creative accountancy work ) of  $30k a year but also has a share portfolio delivering him/her of thousands of dollars of franking credits. These are credits you suggest will be unfairly denied.




Not that im special  but the above ^ could very well be the scenario i find myself in soon, i was planning on living on my investments outside super for a couple/few years and working casually a bit here and there, earning maybe 12K in wages, 6 or 7K trading profits and 6 or 7 K in dividends.

Losing the credits would be a hit to the bottom line, would end up being like a 8% pay cut on a very modest yearly income, options would be few - i dont like the idea of being forced out of the market and having the control of my money taken away from me and given to industry morons.


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## Smurf1976 (10 February 2019)

So_Cynical said:


> Losing the credits would be a hit to the bottom line, would end up being like a 8% pay cut on a very modest yearly income, options would be few



You are the exact situation that seems so wrong to me.

I've said all I can say on it really. It's a policy that hits those in situations like yours harder than anyone else.


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## Toyota Lexcen (10 February 2019)

Basilio,

I still cant find any info in these documents or on Grattan website that they are using the ABS survey.

They are declaring it is their interpretation of the survey though. 

Whats your thoughts about this?

cheers





basilio said:


> !!!
> 
> Really Zaxon ? *Sorry that is just not the case. *In fact the  entire case for the Labour party moving on this issue is the realisation that $5b a year is being given as franking credit refunds overwhelmingly to very wealthy people.
> 
> ...


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## Smurf1976 (10 February 2019)

basilio said:


> Her "sister" (what a lovely touch) *has an investment i*n $200k of BHP shares which is yielding 5% (10k dividends) . She didn't pay any tax  in the financial year to get  a refund.



You're telling me that BHP isn't paying company tax?


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## basilio (10 February 2019)

Toyota Lexcen said:


> I still cant find any info in these documents or on Grattan website that they are using the ABS survey.
> 
> They are declaring it is their interpretation of the survey though.
> 
> Whats your thoughts about this?




TL I'm not sure what you are missing. When you look at the bottom of the graphs I used it says 
"Source - Survey of Income and Housing 2014-5; Grattan Analysis."  The ABS survey which they used for their research can be found here http://www.abs.gov.au/household-income.

The information comes from the survey. It is put into graphical form by the researchers

View attachment 92028 View attachment 92029 View attachment 92030


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## basilio (10 February 2019)

TL you can go the Grattan website and see their assurance and cross checking of research projects they undertake. They don't just let a couple of people loose to write up a paper and then publish.

The papers are checked internally and externally through other research bodies who check the data and critique the accuracy of the figures.

https://grattan.edu.au/about-us/quality-assurance/


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## sptrawler (10 February 2019)

basilio said:


> TL you can go the Grattan website and see their assurance and cross checking of research projects they undertake. They don't just let a couple of people loose to write up a paper and then publish.
> 
> The papers are checked internally and externally through other research bodies who check the data and critique the accuracy of the figures.
> 
> https://grattan.edu.au/about-us/quality-assurance/



Why would someone go to the Grattan institute? They are as unbiased as the Murdoch press.IMO


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## Toyota Lexcen (10 February 2019)

Is there an external group for finance/economic matters


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## Knobby22 (11 February 2019)

sptrawler said:


> Why would someone go to the Grattan institute? They are as unbiased as the Murdoch press.IMO



According to the Murdoch Press.
Great article in the Age today from Chris Pyne.


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## Kremmen (11 February 2019)

basilio said:


> Kathy the tea lady* is working *and  earning less than $18k a year *has paid tax herself *during the year. When tax time comes she tots up her income and will get back *the tax she paid *because she is not liable for it.



It appears, given all the bolding, that you have something against the same tax scale being applied to investment income as to earned income. I don't understand why that is, but surely what you want is to change the tax scales then?

Otherwise, someone who doesn't work but gets $10k/year in rent on an investment property pays absolutely nothing in tax and gets the full $10k, while someone who currently earns $10k on BHP shares will in future earn only $7k. How is that massive market distortion a good thing? Why do you want yet another force artificially inflating the property market?


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## bigdog (19 March 2019)

https://www.theage.com.au/business/...ge_busnews_am&instance=2019-03-18--19-24--UTC

*Westpac shows the way for banks to beat Labor on franking*
*By Lucy Battersby*
March 19, 2019 

Westpac's move to engineer three dividend payments in one financial year will "hopefully" spark similar moves from other big banks, says one leading fund manager, who described the tactic as a way to beat Labor's pledged changes to franking tax policy.

Westpac recently announced it would bring forward its interim dividend payment date by nine days to June 24 giving shareholders a one-off third dividend within the current financial year following an interim dividend last July and a full year dividend paid in December.

The bank has not linked the payment to Labor policy to end cash refunds on franking credits instead saying it was to speed cash returns to shareholders.

On Monday, Mark Freeman, chief executive at the the $7 billion Australian Foundation Investment Company (AFIC) said he believed Westpac had made the change with an eye to Labor's policy.

"What [Westpac] are saying, is that if there is a change in government and a change in franking rules you can still get a refund on the franking for dividends received up to the 30th of June this year," he told _The Age_ and the _Sydney Morning Herald_.

Mr Freeman said he hoped NAB and ANZ Bank will join Westpac in bringing forward the interim dividend payment date to early June.

I would hope that the others are looking at it as well. Maybe it's just a matter of time.

"I presume the other [banks] are looking at it, you would hope. I guess [Westpac] have just looked it and said 'yep that's the right thing to do' and I would hope that the others are looking at it as well. Maybe it's just a matter of time."

Westpac declined to comment on Monday.

AFIC, a staunch public critic of the Labor policy, also on Monday released the results of a survey it conducted of 14,300 investors which found retirees living off their investments relied on the current 18-year-old franking credit policy for "a modest quality of life".

The survey was sent to about 160,000 investors in AFIC and its related Mirrabooka, Amcil, and Djerriwarh funds.

Hundreds of shareholders attended meetings in Melbourne on Monday to express their distress and anger about the proposed change.

"[Shareholders] don't understand why this policy is being put on them," Mr Freeman said.

"Franking credit refundability has been in place for 18 years and it forms a key part of their income. And you are basically taking away income that they use to live off. It is expensive to live in retirement...If you run a conservative portfolio the yields are very low. You don't earn a lot of income."

Mr Freeman said elderly retirees do not understand why they were being "attacked" and targeted by Labor after being incentivised for decades to build self-managed investment portfolios based on franking credit refunds.

"That's just the system. The system is the system," he said.

Labor's Treasury spokesman Chris Bowen repeated earlier comments that AFIC and its related funds have already made public comments and given evidence to the "politicised" parliamentary inquiry.

"Politics is about choices – and Labor makes no apologies for choosing schools and hospitals over tax concessions that overwhelmingly benefit the wealthy," Mr Bowen said.

"The cost of excess imputation credits will soon outweigh what the Commonwealth spends on schools or child care. That’s unfair and unsustainable."

"The current system encourages people to be overweight Aussie shares meaning they have not adequately spread their risk."


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## PZ99 (19 March 2019)

Would be nice if the big 4 paid their divvies on a quarterly basis IMV.


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## Sharkman (20 March 2019)

this will help some if the franking credit changes come to pass, but it will hurt others regardless of whether the franking credit refund remains or not.

now investors will have to pay tax on 3 dividends this FY instead of 2, and that 3rd dividend is going to be at your marginal rate since this is unexpected additional taxable income for the FY.

whereas keeping it the way it is now gets you an extra 12 months to make a return on that capital before having to pay tax on it. may not amount to all that much in an individual year, but if all 3 banks did it and you compound the effects of that over a couple of decades for a portfolio with a significant bank holding, it probably adds up to something meaningful.


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## HelloU (20 March 2019)

????
confused by that sharkbloke.
they put the cash in ur bank account in June for this and peeps do not do tax till Sept or whatevs  - so u have cash to cover tax if u need to .......

this 3 divs in a fiscal is a one off as all following years only have 2 div pays .......... so tax year 19/20 will only have 2 divs.


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## tinhat (20 March 2019)

HelloU said:


> ????
> confused by that sharkbloke.
> they put the cash in ur bank account in June for this and peeps do not do tax till Sept or whatevs  - so u have cash to cover tax if u need to .......
> 
> this 3 divs in a fiscal is a one off as all following years only have 2 div pays .......... so tax year 19/20 will only have 2 divs.




Won't it be just one (final) dividend for 19/20 because the interim is being brought forward into this financial year? They are already at a payout ratio over 81%


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## sptrawler (20 March 2019)

tinhat said:


> Won't it be just one (final) dividend for 19/20 because the interim is being brought forward into this financial year? They are already at a payout ratio over 81%



That is true, I think hellou was just highlighting, that the change to three dividends was a one of.


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## Sharkman (20 March 2019)

the part where you get 3 dividends this FY is a once off. the part where you have to pay tax on the interim div 12 months earlier than you had to previously will continue year after year until they change it back. unless they meant that they're only doing it for this year? i assumed they intended it (late June payment dates) to be an ongoing policy, as if they put it back to early July next year, it would be an obvious political shot which i would've thought companies try to avoid.

what i meant was:
if the dividend gets paid on July 1 2019, you don't pay tax on it until sometime in Nov 2020, because you can book it in the 2019-2020 FY.
if the dividend gets paid on June 28 2019, you have to pay tax on it in Nov 2019.
so in the former case, you get 12 extra months to make a return on the money that you would have paid out as tax 12 months earlier in the latter scenario.

just to be clear - given that the big bank dividends are fully franked, this will only be an issue for investors on the higher tax brackets, that's what i meant by "it will hurt others".

now i haven't quantified the effect of this, which i kind of implied in my previous post. nor am i particularly keen to work up a hypothetical example since it won't affect me either way (i moved overseas several years ago, may come back one day though). but one thing i've learned over the years is that one should never underestimate the effects of compounding on seemingly small amounts/percentages, it can turn out to be quite surprising.


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## Skate (21 March 2019)

*An article from SuperGuide.*

As a voter, and as a taxpayer, I am comfortable with most current retired Australians paying no income tax, and for other retirees paying a lower rate of tax than the younger population (and when I refer to younger, I include myself in that category).

Many of our current Australian retirees paid taxes (higher than what we pay today) for up to 50 years (and some still pay tax), and those taxes helped build the infrastructure and community services that we all enjoy today. Hopefully, the efforts of each successive generation will add to the experience and lifestyle of the generations following.

In terms of retirement planning incentives, and budgetary concerns, of course there needs to be a limit to how far tax concessions extend. Such considerations are particularly relevant when a couple or individual chooses to retire earlier than age 65 and 6 months (current Age Pension age), or earlier even than age 60 (although tax-free super benefits generally only kick in from age 60). A retirement lasting 35 to 40 years is an expensive proposition for the retiree, but may also be an expensive proposition for the working taxpayer shouldering an extra tax burden to enable the retiree to enjoy those tax concessions for 35 to 40 years.

In my view, any future limit to tax concessions should not apply to anyone already retired, and should not apply to anyone on the cusp of retirement (say, within 5 years of retirement). Such individuals are unable to mitigate their circumstances, and the ‘pay cut’ in most instances will be not only financially stressful, but also emotionally stressful. As much as possible, I believe we should not change the rules for retired Australians who have limited opportunity to make up the loss of income.

I consider, as do many Australians, that both political parties have betrayed the current batch of retirees. The Liberals introduced a harsher Age Pension assets test to existing retirees, and an immediate limit on super benefits in retirement phase. While the ALP has announced its intention to abolish franking credits refunds; a policy directed largely towards self-funded retirees, and/or Australians running SMSFs (although other Australians are also affected).

Can we blame retirees for expensive housing? As an important aside, yes, housing affordability is a serious issue in this country which we certainly need to address, but blaming retired Australians for this issue seems illogical and mean-spirited. Housing was indeed cheaper when our current batch of retirees bought homes, but the modest houses they mainly bought (even though some may have subsequently upgraded or downsized) are not the houses Australians are expecting to buy today. Rising house prices has everything to do with population growth, limited land availability, and also relatively high expectations for housing size and amenities. Further, the housing issue cannot be separated from the very high standard of living enjoyed by the current younger generations in terms of accommodation, food, technology, entertainment and travel. The younger generations enjoy a standard of living that was not experienced by previous generations in their younger years, and a standard of living that is in place largely as a result of the efforts of previous generations. (I discuss the generational wars and housing supply and demand, at the end of this article.)

*Punishing retirees who did what they were told*
Over the past decade, the constant theme from both Coalition and ALP governments is how lucky the older generation is in Australia, and how much wealth they hold compared with the younger generation.

I don’t disagree that Australia, compared to many other countries, has a great standard of living for most Australians, although ‘single older women who rent’ is one of the poorest categories of Australians, especially those living solely on the Age Pension.

I am not really sure what policy imposter (a certain think tank comes to mind) started the theory that because older Australians have more money than younger Australians, that in itself is a bad thing. I would hope that an Australian in their sixties or seventies or eighties has accumulated sufficient assets to support a large portion of their retirement, and if they have not accumulated enough savings, then the Age Pension is available to supplement or fully support such an Australian.

Merely cutting retirement incentives is not robust, strategic long-term retirement policy. We want older Australians to have accumulated assets to support their retirement. Suggesting that because they have done what they were expected to do, they should then be punished with retrospective Age Pension and superannuation policies, and selective franking credits policy, is, in my opinion, lazy policy, advised by out-of-touch advisers and egged on by a group of Australians who believe that the younger generations are immediately entitled to a lifestyle that the older generations took 30 to 40 years to create.

If a retired Australian has superannuation savings or non-superannuation savings, and they rely mainly on those savings (super pension, interest, dividends, franking credits) to live, then they did what they were asked to do. Such Australians heeded the key message of successive governments. The key message was you need to save for your retirement rather than relying solely on the Age Pension.

Note that around 70% of Australians over the age of 65 already receive a full or part Age Pension, which confirms the sentiment that our retired population deserves support from the younger working population, just as taxpayers support other Australians too young to work, or physically or mentally unable to work.

Of course, the level of support determined sustainable may change over time, but such changes should be introduced over time, and not apply to current retirees.

*Recent governments, and financial industry, largely ignored our older generations*
I am dismayed that recent governments have been obsessed with demonising older generations who built this country after two world wars and the Depression. These generations are the ‘Frugal’ generation (sometimes called the Silent generation), Baby Boomers, and to a much lesser extent, Generation X. At the risk of being simplistic, the Frugals were born in the 1920s, 1930s and very early 1940s. Baby Boomers were born from mid-1940s to early 1960s, and Generation X were largely born post-1961 (although some argue post-1963).

Note: Baby Boomers are really two distinct groups – the True Baby Boomers (born from 1946 to around 1955) and the Shadow Baby Boomers (from 1956 to 1961-ish, or 1963-ish). Most Shadow Baby Boomers have not yet retired, while nearly all True Baby Boomers have entered retirement.

I am also dismayed that since the mid-1980s (when productivity super was introduced for many workers) and since 1992 (when Superannuation Guarantee was introduced), and since 2007 (when the super rules were simplified to make the system accessible to everyone, rather than just those who could afford financial advice), subsequent successive governments have otherwise stood still in helping Australians build decent retirement balances. In fact, in the past 10 years, since we launched _SuperGuide_ in 2009, both sides of politics have made saving for retirement more difficult, rather than easier.

The federal government is not solely to blame of course. Australians have had a complacent superannuation industry, more interested it seems in warring between themselves, or protecting the special treatment the super industry (and financial advising industry) receives from successive governments rather than lobby for Australian retirees and super savers. What has the super industry done to empower Australians to create a comfortable and secure retirement?

Here we are, in 2019, dealing with the findings from a Royal Commission into the banking, financial services and superannuation industries, where banks and other financial organisations have dishonestly and incompetently failed to act in the best interests of customers and clients (but that’s another article). Here we are, in 2019, with the industry super fund sector refusing to embrace good corporate governance by opposing mandated independent directors while entertaining the idea of becoming quasi-banks for corporate Australia (but again, that’s another article).

Not long after we launched _SuperGuide_, and amid the low point of the Global Financial Crisis (early 2009), the ALP government at the time slashed super contributions caps, rather than providing some leeway for older Australians to rebuild their devastated super accounts. The ALP was also deaf to the possibility of allowing older Australians to re-contribute to superannuation accounts post-retirement (to make up for major capital losses and slashing of retirement balances). Concurrently, the ALP was demonising retirees and also Australians who ran self-managed super funds. Sadly, by targeting SMSFs and older Australians, the ALP was targeting the segment of the population that was hardest hit by the Global Financial Crisis (GFC). And those retirees who were hit hardest by the GFC, often suffered in silence and returned to work to supplement devastated savings.

More recently (2017), the Liberal government has hit this same segment of the population with retrospective and harsher Age Pension and superannuation policies. And now in 2019, the ALP promises to abolish franking credits refunds to this same segment of the population, and other affected Australians.

*Generational politics and the era of entitlement*
Just for the record, I am not a Baby Boomer. I am part of a ‘younger’ generation (but obviously not part of the youngest generations). I am part of the oldest cohort of Generation X, and we now have at least 4 generations that follow Generation X.

Most of my generation entered the workforce in the middle of a recession, unemployment was a major problem (including for Baby Boomers), some of us had a parent/s out of work due to the recession, property was already an affordability issue, the sharemarket had not yet fully recovered from the 1987 crash, interest rates were much higher than they are now, and compulsory super (SG) had not yet been introduced, or was in the process of being introduced. Generation X however missed both world wars, the Korean war, the Vietnam war (although we may have had fathers or uncles who were conscripted to fight), and we enjoyed a relatively stable economic environment (apart from the 1990s recession and the Global Financial Crisis).

The cost of living is definitely higher nowadays due to the much higher standard of living enjoyed and expected by everyone. When I left university and started my first career job, the internet was not in homes, getting take-away coffee every morning was not yet a ‘thing’, and mobile phones were still big bricks and only used by business owners, and some senior executives.

Internet is now ubiquitous in terms of home use and mobile phone use, and when streaming films and TV shows. Everyone seems to want a kitchen straight out of a design magazine, and luxury cars and luxurious homes generally have now become a standard expectation rather than an eventual possibility.

Of course, housing affordability continues to be a major issue for Australians younger than Baby Boomers, but the younger generations are also enjoying a standard of living that is unprecedented, and that previous generations never enjoyed.

We now have youngish commentators, politicians and think tanks espousing weak arguments for why retirees are living it up, and that money should be clawed back in some way. In my view, that is just political bullying of a now-vulnerable segment of the population, reinforced by some of the misleading language used by politicians.

For example, Chris Bowen when referring to the ALP’s proposed ban on franking credits refunds says “Labor is cracking down on a loophole that gives tax refunds to people who have a lot of wealth but don’t pay any income tax”. One, franking credits refunds is not a loophole; it was actively introduced as a policy by the Liberals, on the back of ALP’s introduction of franking credits, and has been considered normal practice for many years. Second, many recipients of the refunds are not wealthy people, although many may own their own home.

Retired Australians are not to blame for the current working generations’ dilemma in saving for retirement, or for housing affordability. Although housing affordability is not the main purpose of this article, I am surprised by how politicians, certain commentators and some younger people are targeting our older citizens. Why are so many people getting worked up about an older couple, or an older individual owning their own home (after, say, 50-plus years), and who have saved all of their lives so they can try to have financial independence (or part independence) in their later years. We should thank them, and congratulate them.

Every generation has experienced advantages and disadvantages, and I do not believe the federal government should be blaming our retirees for events outside of their control (and then taking from our retirees by implementing harsher Age Pension assets test, caps on retirement balances, lower caps on super contributions, potential removal of franking credits refunds) when those retirees cannot mitigate their circumstances.

*Why the GFC is still hurting our retirees*
In my view, the Global Financial Crisis hit Baby Boomers and the ‘Frugal’ generation the hardest, and many are still trying to recover financially, 11 to 12 years later.

Millions of words have been written about the Global Financial Crisis, but very few practical words have been devoted to the plight of retirees, plus those Australians who were on the cusp of retirement when the GFC hit, and those Australians who were planning ahead for their retirement.

At the time of the GFC, many self-funded retirees lost up to half of their accumulated wealth invested via the sharemarket, while a significant number had assets frozen in mortgage funds. Even the safe haven of cash was (and still is) paying interest at a rate that is not much more than the inflation rate. The opportunity for accumulating real wealth was clearly looking grim 11 to 12 years ago.

Although investment markets have improved considerably since then, federal government superannuation and Age Pension policies have savaged most of the benefits salvaged from a market recovery.

Obviously, investing is for the long term and eventually markets do recover, but during the GFC, some retirees were forced to sell assets to live because they no longer had a working income, which meant rebuilding an asset base for retirement became problematic.

If you are a long-term shareholder, then you would be aware that the market has not truly recovered since the GFC. For example, the high point of the S&P/ASX200 was October 2017 (6754.1), and the low-point during the GFC was February 2009 (3344.5) – halved! Eleven years from the October 2017 highs, the S&P/ASX200 sat at 5830.30 (October 2018) – still nowhere near the pre-GFC highs. At the time of writing, the S&P/ASX200 sits at 6175 (17 March 2019), still well below its high from 11.5 years ago. The All Ordinaries index follows a nearly identical trend.

Important: The S&P/ASX200 and the All Ordinaries index has tread water for a long time, which is another reason why dividends, and franked dividends have become so important for retired Australians.

A major problem for non-working retirees then, and now, is that once the money has gone from super, you can’t get the money back into super. And there are those retirees who have never had the opportunity to take advantage of super. If you’re a woman in your sixties, seventies or eighties, you may not even had the opportunity to join a super fund.

The forgotten retirees in this ‘political bullying’ election strategy are those who were too old to fully take advantage of the tax-free super rules introduced from July 2007, and then had dramatically reduced personal share portfolios due to the sharemarket downturn, and are now grappling with harsher Age Pension rules, caps on superannuation retirement balances and the threat of the removal of franking credits refunds.

Australia’s retirees are the backbone of Australia’s sharemarket, and an important source of capital for companies, and savings for banks. Retirees control a significant chunk of the top 200 ASX companies, and are major contributors to the relative stability of our financial markets. For example, Australians running their own self-managed super funds control about 10% of the Australian sharemarket. Many retirees rely on company dividends for income, and franking credits for tax management.

Regardless of which party wins the 2019 Federal Election, please leave retirees alone. I believe that any new policies introduced, should not detrimentally affect the income of Australians who have retired, or who are within 5 years from retirement.

Skate.


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## Ann (22 March 2019)

*Companies helping shareholders to get franking credits*
_
While the furious debate around dividend franking credit refunds is continuing, companies are carefully and quietly ensuring that their shareholders are protected as much as possible from the planned change. 

Westpac (ASX: WBC) is the latest company to effectively help shareholders to get the maximum bang for their buck out of franking credits by engineering three dividend payments in this financial year.


While Westpac didn’t give any reasons for its decision to bring forward its interim dividend payment date by nine days to June 24, it is fairly clear that __Labor’s plan_s to stop paying franking credit refunds to self-funded retirees is behind the move.  More...


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## Izabarack2 (28 April 2019)

I am a self-funded retiree.   I have an Allocated Account pension on which no tax is paid and also have a small Commonwealth pension that is taxable income.   Labor's misrepresented tax policy above will not negatively affect me.    My understand of the policy is to stop allowing franking credits flowing to retirees who do not report a taxable income each year.   It is also pretty easy to create a small taxable income for those who have bundled everything up into a SMSF, so I do not understand all the angst if there are easy workarounds to be had.


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## Zaxon (28 April 2019)

Izabarack2 said:


> My understand of the policy is to stop allowing franking credits flowing to retirees who do not report a taxable income each year.



Not quite. The policy is to tax all dividends at a minimum of 30%.  So if you earn less than $37,000 , you'll be paying more tax.  Plus if all your income is from dividends, there's essentially no tax free threshold, since all your money is taxed at 30% from the first dollar.


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## Bill M (28 April 2019)

Izabarack2 said:


> I am a self-funded retiree.   I have an Allocated Account pension on which no tax is paid and also have a small Commonwealth pension that is taxable income.   Labor's misrepresented tax policy above will not negatively affect me.    My understand of the policy is to stop allowing franking credits flowing to retirees who do not report a taxable income each year.   It is also pretty easy to create a small taxable income for those who have bundled everything up into a SMSF, so I do not understand all the angst if there are easy workarounds to be had.




It affects me. I have a small portfolio of dividend income producing shares outside of super. I am a self funded retiree and as I earn well under 37K a year. I currently get a portion of franking credits rebated to me from the ATO. This is not free money, this is tax paid money already. Bill Shortens short sighted view and cash grab from retirees means that I will no longer receive those franking rebates. To me it means a loss of $3,000 worth of rebates. Why on earth would anyone in their right mind vote for a pay drop of that magnitude? 

And to complicate the matter further, if the man standing next to me has the same portfolio but draws a government pension of say $10 a week he doesn't lose his rebates. Do you think that is fair? I certainly don't and I will NOT BE VOTING LABOR!


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## PZ99 (28 April 2019)

Bill M said:


> It affects me. I have a small portfolio of dividend income producing shares outside of super. I am a self funded retiree and as I earn well under 37K a year. I currently get a portion of franking credits rebated to me from the ATO. This is not free money, this is tax paid money already. Bill Shortens short sighted view and cash grab from retirees means that I will no longer receive those franking rebates. To me it means a loss of $3,000 worth of rebates. Why on earth would anyone in their right mind vote for a pay drop of that magnitude?
> 
> And to complicate the matter further, if the man standing next to me has the same portfolio but draws a government pension of say $10 a week he doesn't lose his rebates. Do you think that is fair? I certainly don't and I will NOT BE VOTING LABOR!



I wouldn't vote for them either in your case. An 8% cut to your income is a hard axe to bear.

I feel the same way about the Coalition and IR laws so I know where you're coming from.

I think ScoMo should get up and pledge to reinstate the credits whenever they return to Govt.


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## HelloU (29 April 2019)

adding facts to avoid confusion ...

Wages are determined by the The Fair Work Commission. They are appointed by the Governor General. This system was basically established by the Rudd Government in 2009 to make the wage setting process independent of government. 

Shorten has said that he will ignore decisions that are made by the commission, and overturn decisions if he does not agree with what the FWC process determines.

Seems pointless to have a commission if that is the case.


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## PZ99 (29 April 2019)

HelloU said:


> adding facts to avoid confusion ...
> 
> Wages are determined by the The Fair Work Commission. They are appointed by the Governor General. This system was basically established by the Rudd Government in 2009 to make the wage setting process independent of government.
> 
> ...



I fail to see what this has to do with franking credits but... Shorten is seeking a mandate to restore penalty rates. If the people don't agree with the FWC they will vote accordingly.

There's no confusion... Bill M doesn't want to lose his credits so he won't be voting Labor.
People who want / need their penalty rates restored probably will vote Labor.

People who want to go broke will probably vote for Greens / Clive Palmer or Fraser Anning


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## Junior (29 April 2019)

PZ99 said:


> I fail to see what this has to do with franking credits but... Shorten is seeking a mandate to restore penalty rates. If the people don't agree with the FWC they will vote accordingly.
> 
> There's no confusion... Bill M doesn't want to lose his credits so he won't be voting Labor.
> People who want / need their penalty rates restored probably will vote Labor.
> ...




The divide is becoming clearer with each policy announcement:
* If you earn more than $100k a year (or aspire to in future) - vote Liberal
* If you are a self funded retiree - vote Liberal
* If you are a low income earner (excl. retirees with direct shares) - vote Labor
* If you participate in a unionised industry, and earn <$100k - vote Labor


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## HelloU (29 April 2019)

glad to help clear things up on how IR works in Australia when other posters mention IR in their writings 

If the communal thought is to throw out the decisions of the independent process then the next step would just be the government of the day making arbitrary decisions on who should get a pay rise ....... Hey Charger, hey Sandman, hey ....what was the name of the Ford offering?

and all of a sudden, without any details to scrutinize, certain sector workers will get promised a 20% wage rise whilst other workers on the same pay levels, are not being offered any pay rise at all. Why do these other similarly paid workers not deserve a pay rise as well?


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## PZ99 (29 April 2019)

Easy. Because those similarly paid workers didn't have their pay cut in the first place.

But when I said IR - I wasn't talking about penalty rates.

There's other IR laws I have issues with which I'm happy to discuss in the relevant thread 

As for Govt of the day making arbitrary decisions - penalty rates should be decided by state Govts - not FWC or any other federal body - it's not practical to overlay one set of shift loadings in a country as diverse as Australia.


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## HelloU (29 April 2019)

(ummmmm .......child care sector workers .......... they are being promised the post election wage rise ....... but similar paid workers are not being offered a wage rise ...... and not being told why they do not deserve one)


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## PZ99 (29 April 2019)

HelloU said:


> (ummmmm .......child care sector workers .......... they are being promised the wage rise ....... but similar paid workers are not being offered a wage rise ...... and not being told why they do not deserve one)



Happy to debate that one with you mate. But not in this thread.

It has zip to do with the topic.


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## HelloU (29 April 2019)

correct, labor, if elected, has promised substantial wage rises to the child care sector (outside of the Fair Work and similar Industrial Relations processes) but will not give wage rises to others workers.

Labor will not say why the pay rise is deserved over similar paid workers who will NOT be offered the same rise ........ Labor seems to be walking away from the independent wage system in Australia that was set up in 2006 by the Labor Party ...... but Labor are not offering an alternate system ....they are saying that they will ignore the Commission decisions when that decision does not suit them.

Are franking credits from retirees going to be used to pay for these wage rises?


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## PZ99 (29 April 2019)

20% wage rise? Make it 40%


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## HelloU (29 April 2019)

oh, if we are having a joke about taking wage rises arbitrary outside the standing state and federal systems (without any explanation or discussion) then lets just make it 800%. 

Why are labor NOT offering minimum wage earners the same wage rise they are promising child care workers? Minimum wage earners are being offered nothing.


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## PZ99 (29 April 2019)

20% over 8 years = around 2.3% a year compounded + their regular payrise.

Phhhhhhttt > Make it 900%


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## HelloU (29 April 2019)

Correct, minimum wage earners are being offered nothing by labor. I expect they would love to be offered that pay rise though (make up for loosing conditions when shorten did the spotless deal). 

I reckon the lowest paid should get first bite at a pay rise .... but I must think differently to some.


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## PZ99 (29 April 2019)

Sounds good mate. I like your proposal. Wanna put it in writing? 

Yes, you are thinking differently to some.

You're thinking about payrises and the FWC - I'm thinking about franking credits...


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## HelloU (29 April 2019)

minimum wage earners are being offered nothing by labor. I expect they would love to be offered that child care pay rise though (make up for loosing conditions when shorten did the spotless deal). that is so true. this is not the Labor I vote for ..........


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## PZ99 (29 April 2019)

They're being offered nothing by Liberal either.

But I would recommend you vote Liberal anyway. Not Labor.
At least Bill M and a million others can then refund their franking credits.


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## HelloU (29 April 2019)

after the election there will only be 1 government. it will matter little what the "other mob" offered, what will matter in 2020 is what the Government is doing to keep people employed.

Shorten talks of tearing up the independent wage system. He says we have a "wage growth problem" in aussie, but can only offer the use of government tax money as the main method to increase wages.

Labor does not seem to have any way to create jobs or increase wages EXCEPT through increasing tax on others. Shorten has a past history of reducing wages and conditions for the lowest paid and now REFUSES to say that the lowest paid deserve a pay rise.

Not too sure who actually deserves a wage rise first if it is not those that are lowest paid.


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## PZ99 (29 April 2019)

So I guess you'll vote Liberal right ?

After all, they too have a past history of reducing wages and conditions for the lowest paid.


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## HelloU (30 April 2019)

PZ99 said:


> So I guess you'll vote Liberal right ?
> 
> After all, they too have a past history of reducing wages and conditions for the lowest paid.



lol (not sure why u focus on telling me how to vote, but what i do behind that screen is my business - if all u do is draw a penis on that page then the vote is junk - but if you fill the form out correctly and then draw dicks all over it the vote is still valid and must be counted)

what some may not realise about the labor policy to fund child care workers is that a wage claim is in front of the FWC now (pushed back for better details) ...... and the potential future Labor government has basically said no matter what the outcome of the determination they are going to give them a pay rise ..... is this political influence on an independent commission?

just as bad in my books as buying water that does not really exist.


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## PZ99 (30 April 2019)

HelloU said:


> lol (not sure why u focus on telling me how to vote, but what i do behind that screen is my business - if all u do is draw a penis on that page then the vote is junk - but if you fill the form out correctly and then draw dicks all over it the vote is still valid and must be counted)
> 
> what some may not realise about the labor policy to fund child care workers is that a wage claim is in front of the FWC now (pushed back for better details) ...... and the potential future Labor government has basically said no matter what the outcome of the determination they are going to give them a pay rise ..... is this political influence on an independent commission?
> 
> just as bad in my books as buying water that does not really exist.



Your fascination with penises seems to have given you a need to falsely assert that I "told" you how to vote. I did no such thing.

1000%


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## HelloU (30 April 2019)

PZ99 said:


> They're being offered nothing by Liberal either.
> 
> *But I would recommend you vote Liberal anyway. Not Labor.*
> At least Bill M and a million others can then refund their franking credits.



lol ... but i digress
the big picture is what a government will do for the country - big minds focus on that ....... the little picture is to attack other posters with personal insults. What would Jesus do?


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## PZ99 (30 April 2019)

HelloU said:


> lol ... but i digress
> the big picture is what a government will do for the country - big minds focus on that ....... the little picture is to attack other posters with personal insults. What would Jesus do?



Crikey mate - do a wiki on the words "recommend" and "tell" and see the difference. 

Personal insults ?


HelloU said:


> lol (not sure why u focus on telling me how to vote, but what i do behind that screen is my business - *if all u do is draw a penis on that page then the vote is junk* - but if you fill the form out correctly and then draw dicks all over it the vote is still valid and must be counted)



Wanna digress from that too ?

The big picture in this thread is franking credits - which is a subject you've been avoiding ever since you started posting in here. I suspect Jesus would play fair but that's your choice.


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## HelloU (30 April 2019)

FairWorkComm has been providing bipartisan remuneration expertise for 13 years ....... Labor has said they will just wipe it all away without any form of replacement. Where will workers go if the independent umpire is gone?

Labor will make poor people include franking credits as income for welfare purposes, even though Labor has pocketed this money and has NO intention of giving it back to poor peeps. How can a Labor government refuse to pay welfare on the basis of these peeps have too much income, but that same income has NEVER gone into the pocket of these poor peeps? That is not the Labor i vote for.

The one who is slack in his work is a brother to one who destroys. The name of the Lord is like a strong tower; the righteous person runs to it and is set safely on high. Some feel the need to speak, even with nothing to say.

(not sure if being told to read wiki, or a recommendation that i read wiki, or merely an observation that wiki is available - matters not though as i do not have the internet anyway)


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## PZ99 (30 April 2019)

Franking credits (which have nothing to do with the FWC) are at risk if Shorten wins Govt (likely) and passes the law through the senate (unlikely). IMV

So I think ScoMo should pledge to reinstate the credits whenever they return to Govt. (very likely)

To say nothing is to accept being led - which is an antonym of independent thinking. (No dice)

I also believe wireless internet is transmitted from many strong towers (insert smiley)


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## HelloU (30 April 2019)

Bill Shorten


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## PZ99 (30 April 2019)

Franking Credits


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## HelloU (30 April 2019)

Franking Credits


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## PZ99 (30 April 2019)

Speaking of franking credits > https://www.news.com.au/finance/mon...x/news-story/ee1fcad2902159e7a85bae4fd5f0c00a

*THE CRITICS*

However, opponents of the changes argue plenty of ordinary Aussies stand to lose out.

The Association of Independent Retirees acting president Wayne Strandquist told news.com.au most affected members did not have millions sitting in the bank, and that on average, those impacted by the proposed changes would lose up to $10,000 a year — or around 20 per cent of their annual revenue.

*He said most were self-funded retirees who only just missed out on the pension, and who were now being penalised for following sensible investment advice.*

“I’d say on average most of our affected members stand to lose $6000-8000 in franking credit refunds, and when you’re dealing with retirees on $30,000-$40,000 per annum, $8000 is 20 per cent of their income — what would politicians do if they lost 20 per cent of their income?” he said.

Mr Strandquist said members were also angry that the policy would not be grandfathered — unlike other major proposed changes such as negative gearing.

“Since 2000 franking credit refunds have been available and people have factored it into their plans,” he said.

“Most affected people are over 70 so they can’t put any more money into super, therefore they’re stuck because if they liquidate their share investments at their age, they’re not confident they will be able to find an alternative.”

He said members were also concerned that the policy had been amended soon after its initial announcement.

“The association believes the franking credit cash refund policy must have been put together with very superficial research because very soon after its announcement, it was significantly amended to exempt hundreds of thousands of pensioners,” Mr Strandquist said.

Last year, the Coalition announced that a House of Representatives standing committee on economics would hold an inquiry into Labor’s proposal, and public hearings have been held across the country.


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## HelloU (30 April 2019)

the welfare aspects get zero airtime. 

welfare entitlement is based upon assessable income.
Welfare is not based upon the taxable income.

Jesus says that there will need to be a welfare cash top-up for some peeps who are denied credits from their assessable income ( to maintain equity in the welfare system ). 

Jesus says the lord taketh, but then the lord has to giveth back.


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## Bill M (30 April 2019)

PZ99 said:


> He said members were also concerned that the policy had been amended soon after its initial announcement.



They had to amend it because they knew that they would lose most of the Labor voting Pensioners. Then when the penny dropped they came to say "all those on government benefits will be entitled to keep their franking credits". Now all those rusted on Labor voters will not jump ship.

What I would like to know is who thinks this **** up? Some guy/gal with no clue about how these things work? Why don't they get a working party together with real ordinary people like an Accountant, self funded retiree, financial planer etc. and go through each and every scenario? You could thrash out a perfect solution in a day. I don't mind giving away some of my franking credits if I have to with a fairer approach but to wipe them out completely without the thought of the consequences to low income self funded retirees is just unfair. Why won't they listen now? Many have spoken up? They don't seem to care. Talk about arrogant.
---
Shadow Treasurer Chris Bowen has doubled down on Labor’s tax agenda, telling retirees who are unhappy with Labor’s policy on dividend imputation they are “entitled to vote against us.”

https://www.smh.com.au/politics/federal/labor-s-unprincipled-attack-on-refunds-20190131-p50uyo.html
---


----------



## PZ99 (30 April 2019)

Bill M said:


> They had to amend it because they knew that they would lose most of the Labor voting Pensioners. Then when the penny dropped they came to say "all those on government benefits will be entitled to keep their franking credits". Now all those rusted on Labor voters will not jump ship.
> 
> What I would like to know is who thinks this **** up? Some guy/gal with no clue about how these things work? Why don't they get a working party together with real ordinary people like an Accountant, self funded retiree, financial planer etc. and go through each and every scenario? You could thrash out a perfect solution in a day. I don't mind giving away some of my franking credits if I have to with a fairer approach but to wipe them out completely without the thought of the consequences to low income self funded retirees is just unfair. Why won't they listen now? Many have spoken up? They don't seem to care. Talk about arrogant.
> ---
> ...



I don't think it's going to happen in any form. The last week of campaigning from the ALP would have to be one of the worst I've seen. People are changing their minds and I reckon we're up for another minority Govt with a hostile senate and nothing getting done for the entire term. 

I'm happy to be proven wrong but I seriously believe this policy will be dead, buried, cremated.

I'll even flip a smiley on it >>


----------



## SirRumpole (30 April 2019)

PZ99 said:


> I don't think it's going to happen in any form. The last week of campaigning from the ALP would have to be one of the worst I've seen. People are changing their minds and I reckon we're up for another minority Govt with a hostile senate and nothing getting done for the entire term.
> 
> I'm happy to be proven wrong but I seriously believe this policy will be dead, buried, cremated.
> 
> I'll even flip a smiley on it >>




It's a matter of how many people are adversely affected and if they would have voted Liberal anyway.

I think it's a cleverly targetted policy designed not to impact core Labor voters.


----------



## PZ99 (30 April 2019)

SirRumpole said:


> It's a matter of how many people are adversely affected and if they would have voted Liberal anyway.
> 
> I think it's a cleverly targetted policy designed not to impact core Labor voters.



Trouble is it affects a lot of low income self funded retirees who may have never voted Liberal.

But it's also now the fallout from the arrogance of Labors' "take it or leave" attitude. 

It's a very Kommy approach that might spectacularly backfire. Look what happened in NSW.


----------



## CNHTractor (30 April 2019)

*"Franking credits changes cop another lashing *

Eliot Hastie
 
 
 

One investment firm has said that in its current form the proposed Labor changes to the franking credit regime do not pass the fairness test for Australian investors.

At an investment day, Stephen Bruce from Perennial Value Management Limited said that while an economic argument could be made the bottom line was that the proposal wasn’t up to scratch.

“Our view is that you can make an economic argument that refunding franking credits should be stopped and wasn’t part of the original imputations system but the bottom line is that the current proposals fail both the fairness test, as they clearly treat different classes of investors differently and they are also likely to be circumvented by those with the largest balances anyhow,” said Mr Bruce.

Mr Bruce is the director portfolio manager for Perennial and said that while the majority of people would be unaffected it was still unfair.

“The important point in this debate is that three quarters of people will see no change, it’s the one quarter that will be affected in a way we think is unfair,” he said.

It is this percentage of people affected that is currently the cause of debate amongst the two major parties leading into the election.

Labor claims that the policy is closing down a tax loophole that costs $8 billion a year and only generates more wealthy for the already wealthy.

“Much of this goes to high-wealth individuals, with 80 per cent of the benefit accruing to the wealthiest 20 per cent of retirees.

“Labor does not think it is fair to spend $8 billion a year on a tax loophole that mainly benefits millionaires who don’t pay income tax – not when school standards are falling and hospital waiting lists are growing longer,” said the Labor release.

The Liberal party, after a controversial and much criticised inquiry into the proposal determined that the policy affected more than just the wealthy.

“The ALP’s policy will unfairly hit people of modest incomes who have already retired, and who are unlikely to be able to return to the workforce to make up for the income they will lose,” said Liberal MP Tim Wilson, who chaired the inquiry.

Luckily for investors it seemed that the proposals would not make it into legislation said Mr Bruce.

“Fortunately at this stage at least, regardless of the election outcome the senate cross bench would be unlikely to support the proposal at least in its current form,” he said.

If the proposals did make it through then it was unlikely to have a huge impact on dividends which performed strongly without franking said Mr Bruce.

“I've just highlighted how important dividends are to total return outcomes and that doesn’t include franking credits.

“With the market trading on a dividend yield of 5 per cent excluding franking, that still stacks up very well compared to fixed income and term deposits.”

A potential solution would to be impose a cap on the credits said Mr Bruce which would protect the average balances.

*“Maybe one solution is that we will end up with a regime where we do allow a refund of franking credits but with a cap on it which protects the typical person with an average balance but stops the very wealthy from getting millions of dollars,” he said.*"

Interesting article. If there were to be a change to franking credit law I would support consideration of the last paragraph. This seems, in one sense treat all investors equally plus gets at the wealthy that Labor claims is there intention.


----------



## SirRumpole (30 April 2019)

PZ99 said:


> Trouble is it affects a lot of low income self funded retirees who may have never voted Liberal.
> 
> But it's also now the fallout from the arrogance of Labors' "take it or leave" attitude.
> 
> It's a very Kommy approach that might spectacularly backfire. Look what happened in NSW.




Just heard on ABC24 that a lot of self funded retirees/pensioners have lost about $10k pa from changes the Libs made to the pensions asset test. They are not happy either.


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## HelloU (30 April 2019)

asset tests are updated 4 times a year ...... it is a real prick when u cannot go on enough cruises in a qtr (or gift enough money) to get/stay on the welfare gravy train.

If some have enough money that they can pay for themselves then save me the outrage when they miss out on welfare. Welfare exists for those who do not enough money to live, *not* for those that are trying to dispose of assets to get under the cap. That welfare money is from the tax money of 30 year olds who spent 8 hours *today* gutting chickens, whilst trying to pay a non-deductable mortgage and trying to put kids thru school. Welfare is NOT paid from tax money given to the government in 1962.

(of course they will vote how they like)


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## Bill M (30 April 2019)

CNHTractor said:


> *“Maybe one solution is that we will end up with a regime where we do allow a refund of franking credits but with a cap on it which protects the typical person with an average balance but stops the very wealthy from getting millions of dollars,” he said.*"



And that sounds reasonable to me.

I read somewhere that this could affect between 1 - 1.5 Million Australians and a great deal of them would be self funded retirees and seniors.

On the highway into my town there is a big sign sign with a picture of Bill Shorten pulling some kind of a face with the words "retirees tax" written on it. 10's of thousands of people will see this each day. All we need a few people in each marginal seat to support the Libs (that wouldn't have normally) and Labor will lose. It's too late for them to change policy now, they have to run with what they got. I honestly don't think Labor will win but I could be wrong. Took a bet 4 to 1 that the Libs will form government, it doesn't seem so far off now.


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## HelloU (30 April 2019)

Hmmmm, how will those credits get spent ........ Shorten (Labor) says that govt tax money will be paid ONLY to child-care workers. Penny Wong says that govt tax money will be given to child-care AND old-age workers. One of them must have it wrong. 

Butler (Labor) says it is impossible to calculate the cost to the economy of the greenhouse gas thing policy ..... and not possible to say by how much it will change the world climate. I would have thought that after 3 years working on the thing he may at least have had ballpark ideas???

Mundine (Liberal) says says that govt pensioners will get a pension rise - that is a true statement cos indexed twice a year but a real ******** statement to make and have it plastered on the side of his campaign bus like it is a campaign policy. Does he even know where Gilmore is?


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## Smurf1976 (6 May 2019)

SirRumpole said:


> It's a matter of how many people are adversely affected and if they would have voted Liberal anyway.
> 
> I think it's a cleverly targetted policy designed not to impact core Labor voters.



It doesn't impact me personally but I do see major issues of fairness with it and even more with Labor's expressed "take it or leave it" approach which seems incredibly arrogant to me especially given they're not even in government yet.

This policy is the only reason why I'm still undecided who to vote for. In the event that I do end up voting Liberal then this policy will be the reason why.

Not because I'm opposed to fair and reasonable taxation but because I'm opposed to the idea that it's acceptable to simply wreck the legitimate self-funded retirement plans of ordinary workers when they could instead apply a sharper tool to crack down on those who rort the system assuming that is the real intent. 

As a lazy approach to policy, it's not much different to sending 50 people to jail because we know one of them's guilty. A better approach would be to find out who's guilty and punish them but not the rest.


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## SirRumpole (6 May 2019)

Smurf1976 said:


> A better approach would be to find out who's guilty and punish them but not the rest.




Fair comment. As I said previously people should state their real income including tax free payments and if that is over a certain amount, they don't get the rebate.

You're right about arrogance, but I think it's more arrogant to cut 330,000 people's pension entitlements with no warning whatever.

https://www.superguide.com.au/smsfs...-to-lose-some-or-all-age-pension-entitlements


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## Junior (6 May 2019)

One major problem, with both parties and their superannuation & age pension policies, is that they implement new rules which add a fresh layer of complexity, into an already complex system.  This confuses everyone and means there are major unintended consequences.  

The franking credit policy is a shining example of that.  Under the proposed rules, one could simply move their pension out of SMSF and into a retail/industry fund, and still benefit from franking credits.....what??  This is such an easy workaround!  So how the hell are they going to close that loophole?  What about large SMSF balances, with some members in accumulation and some in pension....guess what, THEY WILL STILL BENEFIT FROM FRANKING CREDITS.  So you're basically using a scatter-gun approach to the system, which will only really serve to boost federal tax revenue, at the expense of many self-funded retirees who will suffer a sudden pay-cut, and push more of them onto Age Pension.

If the aim is hit those with big super balances, there are already mechanisms and levers available to address that.  Total Superannuation Balance and Transfer Balance Cap.  Simpy reduce the limits and you can reign in the excesses.  Alternatively we could introduce common sense to the system.  Scrap TSB and TBC, and start taxing Account Based Pension income in the hands of the individual (0% up to a reasonable amount, say $80k pp, and then a tax scale).  This would tie in nicely with Minimum Drawdown percentages.

On another issue.  Labor want employer contributions increased to 12%, while at the same time they want to restrict the ability of an individual to make voluntary contributions (reduce Non-Concessional cap).  So....are we aiming to get more money into super, or less?!?


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## Bill M (6 May 2019)

Smurf1976 said:


> This policy is the only reason why I'm still undecided who to vote for. In the event that I do end up voting Liberal then this policy will be the reason why.



I am a swinging voter and this year Labor will not get my vote because of this unfair treatment. It's too late for them to change policy now, I hope they lose. You just can't treat retired people like this. They worked to save and invest all their lives with the rules that the Governments have set in place. We (I am one of them) all did what they wanted us to do and we followed the Financial Planners advice all the way through our career. So now that we have retired they want to pull the rug from under us after all this time. No I'm not the big end of town, just a simple self funded retiree, my wife and I. They reckon this will affect a Million people, I hope they have all tuned in and VOTE AGAINST LABOR, love to see it backfire on them!


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## SirRumpole (6 May 2019)

Bill M said:


> I am a swinging voter and this year Labor will not get my vote because of this unfair treatment. It's too late for them to change policy now, I hope they lose. You just can't treat retired people like this. They worked to save and invest all their lives with the rules that the Governments have set in place. We (I am one of them) all did what they wanted us to do and we followed the Financial Planners advice all the way through our career. So now that we have retired they want to pull the rug from under us after all this time. No I'm not the big end of town, just a simple self funded retiree, my wife and I. They reckon this will affect a Million people, I hope they have all tuned in and VOTE AGAINST LABOR, love to see it backfire on them!




Are you willing to state exactly how much you will lose by this policy and how much your non taxable income is ?


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## Gringotts Bank (6 May 2019)

How will the end of franking credits affect the behaviour of the market?  Will non-div stocks attract more moola?


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## Bill M (6 May 2019)

SirRumpole said:


> Are you willing to state exactly how much you will lose by this policy and how much your non taxable income is ?



I will lose around $3,000. I think my income was around $25,000. It varies from 25 to 30K for a year but lately it's been well down. I get zero from social security as I am not pension age, therefore this policy will affect me.


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## Smurf1976 (6 May 2019)

SirRumpole said:


> You're right about arrogance, but I think it's more arrogant to cut 330,000 people's pension entitlements with no warning whatever.



There's the great dilemma. Trying to take a neutral view in making this comment:

Liberal - wants people off welfare and to be self funded. Hence cuts to the Age Pension for those with more assets, making anyone who's unemployed jump through countless hoops and so on.

Labor - wants people out of self funding and on any welfare payment administered by Centrelink. Hence the 30% tax on dividends for anyone who goes down that track unless they're also on welfare.

Now the problem is that anyone not at death's door is likely to see both Labor and Liberal governments during the remainder of their life and there's no real approach that works under both. At some point, usually in the first half of your life, you're going to either commit to the saving, investing and self-funding approach or your're going to commit to the spending and welfare approach. It's not like choosing between Coles and Woolworths where you can change every time you go shopping or choosing which insurance company to use where you can review it annually. With this one you're pretty much stuck and it's a big thing not something trivial.

The same broad concept applies to other key policy areas too. Energy is one that has drawn much attention - nobody's willing to invest serious money whilst we have a situation where which ever technologies they invest in, they're making a bet that one party or the other is in government for up to a century and we all know that's very unlikely to actually be the case. Hence the chronic under-investment in energy infrastructrue.

What we really need is an agreed approach on this long term sort of thing between both major parties. 

Either we're having people self fund with welfare as a measure of last resort or we're saying that welfare's something most can expect to receive at some point and don't worry about self funding. Likewise with the energy example either we're going with coal or nuclear or solar or whatever.

The lack of direction is the real issue. Most could probably live with going either way so long as there's no chance that the rug is pulled from under them once they're committed and can't change course thus leaving them pretty much stuffed.


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## sptrawler (6 May 2019)

PZ99 said:


> I wouldn't vote for them either in your case. An 8% cut to your income is a hard axe to bear.
> 
> I feel the same way about the Coalition and IR laws so I know where you're coming from.
> 
> I think ScoMo should get up and pledge to reinstate the credits whenever they return to Govt.



That wont happen, it is just another nail in the coffin of the working class. The land of opportunity, is fast coming to an end. IMO


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## sptrawler (6 May 2019)

Smurf1976 said:


> There's the great dilemma. Trying to take a neutral view in making this comment:
> 
> Liberal - wants people off welfare and to be self funded. Hence cuts to the Age Pension for those with more assets, making anyone who's unemployed jump through countless hoops and so on.
> 
> ...



It is much easier to control people who are wage slaves, than financially independent workers.
Just get everyone to spend all they earn, then hang carrots in front of them, easy motivator.
If all workers end up on a pension, no intergenerational wealth transfer, equals hungry workers.
No down side for the Government.


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## HelloU (7 May 2019)

Bill M said:


> I will lose around $3,000. I think my income was around $25,000. It varies from 25 to 30K for a year but lately it's been well down. I get zero from social security as I am not pension age, therefore this policy will affect me.



quietly whispering
single rate is over $24K
couples rate over $36K

the system is designed such that these are the safety net figures - no old peeps are meant to be living under the pension rate.


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## bigdog (17 July 2019)

https://au.finance.yahoo.com/news/d...n-franking-credits-in-one-year-001346493.html

*‘Ridiculous’: Millionaire Dick Smith received $500k in franking credits*

Lucy Dean
Yahoo Finance17 July 2019


The Sydney Morning Herald and _The Age,_[/a] Smith said he received around $500,000 in franking credits in the 2016-17 financial year, before receiving another $250,000 in the 2017-18 financial year.


Does the government spend more on franking credits than on public schools?

Franking credits formed a crucial part of the Labor party’s pre-election campaign, with the party arguing the payment of cash refunds on franking credits should be abolished.

*What are franking credits?*
As it stands, investors receive franking credits which they can use to offset tax on dividend payments.

The idea is that that money has already been taxed at the company level, so it shouldn’t be taxed again at a personal level.

However, as retirees generally don’t pay tax on their income, they are given cash refunds instead of credits as they don’t have any tax to offset, something the Labor party wanted to abolish.

*“Outrageous”*
Smith - who has an estimated net worth of $60 million - declared the cash refund system “outrageous”.

"I found I was getting this ridiculous money from the government," Smith said.

"That's wrong, I said - I'm wealthy. My accountant said 'that's how it works, that's what you have to do'. I can't stop it. I think it's outrageous for wealthy people to be getting money from the government."

*Enquiry into the “retiree tax”*
Labor’s plan to remove cash refunds on franking credits was a highly controversial policy, with the Liberal party describing it as a “retiree tax”.

Following Labor’s pitch, the government launched an inquiry through the House of Economics Committee. Chaired by Liberal MP Tim Wilson, the enquiry and the MP were both accused of bias.

Wilson is related to fund manager Geoff Wilson, who was also campaigning heavily against the policy and who admitted to partly funding stoptheretirementtax.com.au website, which sought to keep the current system in place.

The website was also authorised by Tim Wilson.

Speaking before the election, Shadow Treasurer Chris Bowen said Treasurer Josh Frydenberg should be open about the enquiry and described it as a “taxpayer-funded partisan roadshow for partisan purposes dressed up as a House of Representatives committee”.

*So what should Smith do with the money? Australian’s weigh in*
Now, Australians are suggesting Smith donate the money to charity.

“Donate your taxpayer franking credits to a charity which helps homeless people. At least that way the government would be improving its funding model,” one person said.

But others questioned the timing, and wondered why Smith hadn’t spoken up before the election.

“So Dick Smith you're putting this out there NOW (post election) so the government has support and an excuse to scrap franking credits and save a shitload of money for its surplus. Labor's policy was always valid,” another Twitter user said.

Smith’s admission coincides with the Royal Commission into Aged Care Quality and Safety, which revealed that some retirement villages were spending around $7 a day on meals.

This wasn’t lost on the Australian Council of Social Services.

“Govt sends Dick Smith a $500,000 dividend imputation cheque he doesn’t want, and nursing home residents get $7 meals. Something’s wrong,” the peak community sector body wrote on Twitter.


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## sptrawler (17 July 2019)

Typical Labor bigdog, they made a dog's breakfast of it yet again.
If they had progressive component, it would have been accepted, but then they would have missed out ripping off the 'little man'.


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## sptrawler (17 July 2019)

bigdog said:


> https://au.finance.yahoo.com/news/d...n-franking-credits-in-one-year-001346493.html
> 
> *‘Ridiculous’: Millionaire Dick Smith received $500k in franking credits*
> 
> ...




Here is an interesting read for you bigdog.

https://www.smh.com.au/federal-elec...capping-franking-credits-20190522-p51q2v.html

From the article:
_According to Budget Office costings, capping the refunds at $5000 would have cost the budget $287 million in 2014 – a fraction of the $2.6 billion in revenue the overall scheme cost that year. That figure was expected to rise to $4.4 billion in 2020-21, but those claiming $5000 were still likely to only make up 10 per cent of refunds.

Instead, Labor opted only to exempt pensioners and never considered grandfathering the scheme because this would have created two classes of retirees and made no revenue in the short term_.

Blew their feet off, for a couple of hundred million, typical. Like I said look after the little man, as if.


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## Value Collector (17 July 2019)

The problem is that the discussion should not be about franking credits at all.

The discussion should be about “should there be tax exempt earnings”

If the answer is yes, then franking credit refunds is total ok, because we are just returning the tax charged on the person’s earnings that they should be paying.

But if the answer is no, then don’t target franking credits target all earnings, eg Bank interest, dividends, rental income, uber, etc etc etc


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## sptrawler (17 July 2019)

Value Collector said:


> The problem is that the discussion should not be about franking credits at all.
> 
> The discussion should be about “should there be tax exempt earnings”
> 
> ...



IMO the main target was SMSF's and the main reason was, to make the SMSF model unattractive, the main driver of the proposal was to move the 1.2m members to industry funds.
If that wasn't the driver, they would have included a low threshold or a scaled reduction, as it was costed and would have had minimal effect on the overall amount saved by the policy.
The other issue was the savings quoted, were pre the $1.6m pension caps, therefore excess amounts had to be moved back into accumulation and are taxed so franking credits could be used, so the savings would have been much lower than quoted.
It was all smoke and mirrors. IMO

But as I said I don't think $ savings, was the prime motivation for the policy, forcing members over to industry super was the goal.
Just my opinion.


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## So_Cynical (18 July 2019)

sptrawler said:


> Typical Labor bigdog, they made a dog's breakfast of it yet again.
> If they had progressive component, it would have been accepted, but then they would have missed out ripping off the 'little man'.




All they needed to do was cap the franking credits refund at say 4K, problem neutralised..poor (normal people) keep all or most of their credits - rich people the opposite.


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## HelloU (18 July 2019)

any journalists that are quoting figures from 2014 or pre 2018 tax year may have very little to contribute to the argument going forwards .... those figures do make very good copy though to get the attention of readers who do not understand the current legislation. Those figures cannot EVER be attained again by young aussies after recent legislation changes.

yes, dick smith may have $1.6M in pension phase and another $50M or whatever grandfathered  in accumulation phase but that is now essentially impossible for future peeps to do. Is the problem here with franking, or is it with grandfathering, or is it with untaxed income?

so 2 points:
1. if the grandfathering of superannuatiion balances is the problem, then deal with the grandfathered balance problem
2. if "untaxed income" is the problem then deal with the untaxed income problem (like vc said)

i reckon the real problem is that nobody can really say what the actual problem is with franking credits - except that those without money want more money from those that have money - but that does not apply solely to credits .......


----------



## sptrawler (18 July 2019)

So_Cynical said:


> All they needed to do was cap the franking credits refund at say 4K, problem neutralised..poor (normal people) keep all or most of their credits - rich people the opposite.



Absolutely, they did modeling and it would have cost $270m to cap it at $5k, they would still have got $billions.
Like I said before the main purpose in getting everyone, was to get SMSF's to close and transfer to Industry Funds. IMO that is the only obvious conclusion, well it cost them an election, so they deserve everything they got.
Just another conflict of interest, with unions/labor running the industry funds, another 1.2m members and an extra $800b wouldn't go astray.
But as HelloU said, the figures they were using were BS anyway.


----------



## sptrawler (18 July 2019)

HelloU said:


> any journalists that are quoting figures from 2014 or pre 2018 tax year may have very little to contribute to the argument going forwards .... those figures do make very good copy though to get the attention of readers who do not understand the current legislation. Those figures cannot EVER be attained again by young aussies after recent legislation changes.
> .



That will be the problem for Labor at the next election, if they try and roll it out again, it will be shown that they are using dodgy figures.
So it will backfire, yet again.


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## IFocus (18 July 2019)

Value Collector said:


> The problem is that the discussion should not be about franking credits at all.
> 
> The discussion should be about “should there be tax exempt earnings”
> 
> ...





Haha you are talking into the wind here VC yes it should be about tax not free money for nothing.

Current system hands out welfare to the very wealthy as Dick Smith has pointed out the tax system needs reform instead we got a political decision to hand the wealthy even more by the way of unfunded  taxs cuts go figure.

And its not all Labors fault Howard started the rot in the middle of the largest revue flow to government coffers ever seen leaving a mega deficit black hole no one wants to still to discuss (just like the current mob sound familiar) and it was never about SMSF's going to industry funds.

Over to you SP


----------



## Value Collector (18 July 2019)

IFocus said:


> Haha you are talking into the wind here VC yes it should be about tax not free money for nothing.
> 
> Current system hands out welfare to the very wealthy as Dick Smith has pointed out the tax system needs reform instead we got a political decision to hand the wealthy even more by the way of unfunded  taxs cuts go figure.
> 
> ...




The system would allow dick Smith to earn tax free dollars no matter where his dollars were invested.

There is no difference between allowing him to earn $1 tax free in bank interest or rental property income and giving him a $0.30 refund of franking credits on a $0.70 dividend.

Both involve an investment earning $1, and both allow the investor to take that $1 tax free.

The fact that the $1 was earned inside a company and was taxed before the investor got so the investor needs a refund is irrelevant,


----------



## Klogg (18 July 2019)

HelloU said:


> i reckon the real problem is that nobody can really say what the actual problem is with franking credits - except that those without money want more money from those that have money - but that does not apply solely to credits .......




I agree. 

The only problem I can see is that the system, as it currently stands, incentivises companies to pay out dividends, rather than retain earnings and reinvest. When super funds get a refund from franking credits, a large part of your shareholder base wants it.

If company tax rates were halved, franking credits remained, and we increased consumption taxes instead, I think we'd see more in retained earnings, than in dividends. This is highly theoretical, but we just need to look at incentives, and rework it to promote productivity increases.


----------



## sptrawler (18 July 2019)

IFocus said:


> And its not all Labors fault Howard started the rot in the middle of the largest revue flow to government coffers ever seen leaving a mega deficit black hole no one wants to still to discuss (just like the current mob sound familiar) and it was never about SMSF's going to industry funds.
> 
> Over to you SP




Come on you are pulling a long bow there, it had to be Menzies fault.

But in reality, there is a real problem, education standards falling, manufacturing declining, technology replacing functions, power and service costs increasing, welfare increasing.
There is no easy answer, I know I'm helping my kids, as you and many others probably are. But the long term prognosis isn't good, jobs will have to be invented or virtual reality will have to improve.
Is there any wonder there is a drug epidemic.


----------



## Klogg (18 July 2019)

sptrawler said:


> Come on you are pulling a long bow there, it had to be Menzies fault.
> 
> But in reality, there is a real problem, education standards falling, manufacturing declining, technology replacing functions, power and service costs increasing, welfare increasing.
> There is no easy answer, I know I'm helping my kids, as you and many others probably are. But the long term prognosis isn't good, jobs will have to be invented or virtual reality will have to improve.
> Is there any wonder there is a drug epidemic.




For a long time, we've automated manual tasks. Somehow, the unemployent rate stayed low. Even as females came into the workforce in large numbers, unemployment stayed low. Why automation of manual tasks is NOW a problem, I have no idea.

As for 'jobs' - the idea of actually working for a company, as opposed to yourself, is relatively new (a few hundred years?). I hazard a guess that the benefits paid (Workcover, superannuation, Sick leave, annual leave) are all making full time employment more expensive, as is the consistent increase in minimum wage. Either we'll start relaxing these, then provide other means of welfare to those on the lowest of incomes... or many more companies will take the Uber approach and treat everyone as their own company.


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## IFocus (18 July 2019)

Value Collector said:


> The system would allow dick Smith to earn tax free dollars no matter where his dollars were invested.
> 
> There is no difference between allowing him to earn $1 tax free in bank interest or rental property income and giving him a $0.30 refund of franking credits on a $0.70 dividend.
> 
> ...




The point I made (perhaps poorly) is there were no earning's by the investor to offset the franked div against its paid regardless.

The tax offset against earnings then should end at the company IMHO.


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## sptrawler (18 July 2019)

IFocus said:


> The point I made (perhaps poorly) is there were no earning's by the investor to offset the franked div against its paid regardless.
> 
> The tax offset against earnings then should end at the company IMHO.



If it was in his super, which I can't believe it was, most of the earnings(dividends) would have been taxed at 15%. Only the earnings on $1.6m would have been tax free, so approx $50k of dividends.
If it is in a company structure, which from his past one would think is most likely, then the earnings would have been taxed at 30%.
If it is held in his name, the dividends would have been taxed at the appropriate marginal rate.
So how he would have got a refund of $500k in cash, would be interesting to know, more likely there was a bit of journalistic license as with the rest of the story.


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## sptrawler (18 July 2019)

Klogg said:


> For a long time, we've automated manual tasks. Somehow, the unemployent rate stayed low. Even as females came into the workforce in large numbers, unemployment stayed low. Why automation of manual tasks is NOW a problem, I have no idea.



In 1965 when I came to Australia the population was 12 million, small farms employed farm hands, the mining boom started, immigration cranked up to fill jobs in foundaries, factories, we made everything washing machines, t.v's, fridges, shoes, clothes, wool mills, blankets, trains, rolling stock, tractors, cars, ships, steel mills, blast furnaces, rubbish trucks had three men on them, buses had conductors and drivers .
The population is now 24 million and most of those jobs have gone and the associated industries, now most people work in the service industry, which doesn't produce much just circulates money in the economy.
So what funds our ever increasing living standards and welfare costs?




Klogg said:


> As for 'jobs' - the idea of actually working for a company, as opposed to yourself, is relatively new (a few hundred years?). I hazard a guess that the benefits paid (Workcover, superannuation, Sick leave, annual leave) are all making full time employment more expensive, as is the consistent increase in minimum wage. Either we'll start relaxing these, then provide other means of welfare to those on the lowest of incomes... or many more companies will take the Uber approach and treat everyone as their own company.




When I was working, the rule of thumb was it cost 50% on top of wages, to employ some one as a full time employee.
A manager in the late 80's said to me, it was a saving of $1m per employee they got rid of, so it was an extra $1m they could borrow to build the business. I wouldn't think it has become cheaper, so as you say full time employees are expensive and if they aren't productive well the result is obvious.
I think you are right about the Uber approach, it will become more the norm, as bigger businesses close.
The welfare bill IMO is the elephant in the room, everyone wants to improve welfare which is understandable, however eventually we will run out of money to fund it.
Taking money off one sector to fund another sector, just ends up with everyone at the lowest common denominator. The franking credits should have had a progressive component in the proposal, you can't introduce a system that encourages most to strive to get on a part pension, when for years you have been encouraging everyone to do the opposite.
They just got caught up in an ideological loop internally, that they couldn't get out of, this is the problem when political parties owe someone.IMO
Ala political donations.


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## Klogg (18 July 2019)

sptrawler said:


> In 1965 when I came to Australia the population was 12 million, small farms employed farm hands, the mining boom started, immigration cranked up to fill jobs in foundaries, factories, we made everything washing machines, t.v's, fridges, shoes, clothes, wool mills, blankets, trains, rolling stock, tractors, cars, ships, steel mills, blast furnaces, rubbish trucks had three men on them, buses had conductors and drivers .
> The population is now 24 million and most of those jobs have gone and the associated industries, now most people work in the service industry, which doesn't produce much just circulates money in the economy.
> So what funds our ever increasing living standards and welfare costs?
> 
> ...




I can agree with most of that. Just two points I'm not so sure of:

"The population is now 24 million and most of those jobs have gone and the associated industries, now most people work in the service industry, *which doesn't produce much just circulates money in the economy*."

I'm not so sure. As we specialise, we can perform the same service at a higher quality, faster.
For example, I pay a plumber a call out fee + $X per hour, as opposed to me doing the same work. There's a very high chance that if I pay him to do it, and work those same hours myself, it's more productive. And as specialization goes on, we'll improve that difference and increase productivity.


"The welfare bill IMO is the elephant in the room, everyone wants to improve welfare which is understandable, however eventually we will run out of money to fund it."

I sort of agree, but it depends. The pension is not really welfare in my view. 30 years back (you'll know this better than me), many people had taxes taken from their income, which was to fund their pension. Now, they're told they're receiving welfare. The government at the time didn't tell them that - and I think we're obliged to meet those promises to a certain degree.
Once my generation hits retirement, it's a different story - we have superannuation.

Other forms of welfare might be different, I don't know enough about it. But if we can increase productivity faster than we increase welfare, we're good. If we're 3% more productive every year, why shouldn't some of that go to helping those with less?
After all, the world is driven by envy, not greed. So if the gap between the haves and the have-nots gets too big, people will be upset - and rightly so. (I don't know where the sweet spot is, but there is one)


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## sptrawler (18 July 2019)

Klogg said:


> I can agree with most of that. Just two points I'm not so sure of:
> 
> "The population is now 24 million and most of those jobs have gone and the associated industries, now most people work in the service industry, *which doesn't produce much just circulates money in the economy*."
> 
> ...



Yes but in itself it isn't adding anything to the economy, say you were unemployed, all that has happened is the Government has paid the plumber. If you worked for Bunnings, they earn all their money from Australians buying stuff, so really the plumber has just got another Australians money. Now if you manufactured shoes, and sold them on ebay, then paid the plumber, you have brought more money into the economy. A bit simplistic, but i think that is what I was getting at.



Klogg said:


> "The welfare bill IMO is the elephant in the room, everyone wants to improve welfare which is understandable, however eventually we will run out of money to fund it."
> 
> I sort of agree, but it depends. The pension is not really welfare in my view. 30 years back (you'll know this better than me), many people had taxes taken from their income, which was to fund their pension. Now, they're told they're receiving welfare. The government at the time didn't tell them that - and I think we're obliged to meet those promises to a certain degree.
> Once my generation hits retirement, it's a different story - we have superannuation.



Actually the welfare 6% tax, was absorbed into consolidated revenue in the 1950's by Menzies, from memory. Hawke and Keating removed it from the statutes, in the 1980's and started the current super system.
Your generation will have adequate super, if they have a high enough paid job, otherwise they will still require the pension.



Klogg said:


> Other forms of welfare might be different, I don't know enough about it. But if we can increase productivity faster than we increase welfare, we're good. If we're 3% more productive every year, why shouldn't some of that go to helping those with less?
> After all, the world is driven by envy, not greed. So if the gap between the haves and the have-nots gets too big, people will be upset - and rightly so. (I don't know where the sweet spot is, but there is one)



I agree with your sentiment, but IMO there is a bit of a gray area when you say the World is driven by envy not greed, one is a function of the other. IMO
In reality all humans need is food, water, shelter and clothing, everything above that is greed or the envy of wanting something the other greedy bar$tard has.

The gap between the haves and have nots will always grow, in most cases there is a reason the haves have and the have nots don't and it usually isn't misfortune.


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## Value Collector (18 July 2019)

IFocus said:


> The point I made (perhaps poorly) is there were no earning's by the investor to offset the franked div against its paid regardless.
> 
> The tax offset against earnings then should end at the company IMHO.




I don’t understand what you are saying there.

Are you saying it’s some how ok for an investor to ever $1 tax renting out property.

But,

If that same property were held under a company name, and that $1 was taxed 30cents at the company level, it isn’t ok for that investor to get that 30cents refunded later so that he earns the same $1 tax free as the guy who invested outside a company structure?

You must be able to see getting a franking credit refund is no different To any other income that is tax free


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## IFocus (18 July 2019)

Value Collector said:


> I don’t understand what you are saying there.
> 
> Are you saying it’s some how ok for an investor to ever $1 tax renting out property.
> 
> ...





You have lost me as well 

From the start the idea of not being taxed on the franked amount was to avoid tax x 2 i.e. tax paid by the company and then tax paid again on the income distribution to an investor.

A super fund in pension phase pays no tax its essentially a tax vehicle but is paid the franked amount by the government even though the fund pays no tax its makes no sense.


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## sptrawler (18 July 2019)

IFocus said:


> A super fund in pension phase pays no tax its essentially a tax vehicle but is paid the franked amount by the government even though the fund pays no tax its makes no sense.




Unless the member of the fund is getting a Government welfare pension, then they get the franking credit, now that really makes sense that really clears it up.


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## sptrawler (18 July 2019)

IFocus said:


> A super fund in pension phase pays no tax its essentially a tax vehicle but is paid the franked amount by the government even though the fund pays no tax its makes no sense.




The other point I take issue with is, Industry and retail super funds were not going to lose their franking credit returns, yet everyone else (except those who were receiving welfare) who paid less than 30% tax rate were going to lose the refund.
How can that be right, when the maximum the super funds pay is 15% on earnings, in the accumulation phase?
Why would they retain full 30% refund? When a SMSF with two members, one in accumulation and one in pension phase, lose the refund?
If it was about the money, Industry and retail funds would have been included in the proposal, but as I've said that wasn't the main point of the excercise. IMO


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## Value Collector (18 July 2019)

IFocus said:


> You have lost me as well
> 
> From the start the idea of not being taxed on the franked amount was to avoid tax x 2 i.e. tax paid by the company and then tax paid again on the income distribution to an investor.
> 
> A super fund in pension phase pays no tax its essentially a tax vehicle but is paid the franked amount by the government even though the fund pays no tax its makes no sense.




No, you don’t quite understand the system.

Franking credits are designed to allow profits to be passed along to the investor and taxed at their marginal rate, if that marginal rate is 0%, then the investor gets a refund of the tax taken from their profits.

———-
This short example will explain it to you.

Let’s say you and me go 50/50 in an investment property, but you purchased your 50% under your own name and I purchased my 50% under a company name called VC pty.ltd.

Let’s say that the investment property earns $2, which we spilt. 

You get $1 profit, and the government lets you keep that full $1, because you are in a 0% tax bracket.

However, because I hold my half of the property in a company name, before I get the $1, the government takes 30cents “company tax”, leaving me with 70cents available for dividend.

So I only end up getting 70cents dividend, where you got the $1.

But franking credit refunds level the field, and because the government decided I am in a 0% tax bracket, they refund me the 30 cents they took, so I now have the same $1 you do.

————

So both of us end up with the same $1, just because I needed a franking credit refund to get my $1 doesn’t mean I got more than you.

If the government didn’t allow refunds, they are unfairly targeting investors that invest their money through company structures.


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## Smurf1976 (18 July 2019)

Klogg said:


> I can agree with most of that. Just two points I'm not so sure of:
> 
> "The population is now 24 million and most of those jobs have gone and the associated industries, now most people work in the service industry, *which doesn't produce much just circulates money in the economy*."
> 
> I'm not so sure. As we specialise, we can perform the same service at a higher quality, faster.



Where the issue arises is that the residential plumber, for example, almost certainly isn't doing any work at all for export and is only serving the local population. 

In contrast anything from a foundry to a wool mill to a ship yard was making product either for export or as an alternative to imports. They were all bringing money into the country or were an alternative to sending it out whereas the plumber does nothing of that nature.


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## Smurf1976 (18 July 2019)

IFocus said:


> Current system hands out welfare to the very wealthy as Dick Smith has pointed out the tax system needs reform instead we got a political decision to hand the wealthy even more by the way of unfunded  taxs cuts go figure.



Reforming the tax system so as to not give handouts to the wealthy is one thing and seems entirely sensible.

Slapping a 30% minimum tax rate on some 55 year old retired builder who's self funded outside of super seems extremely harsh however given that literally everyone else gets the tax free threshold, actual billionaires included.

Targeting people from ordinary backgrounds who simply saved some of their income and invested it is why the idea was so unpopular. If a retired bus driver or butcher who bought some shares in BHP, Telstra and Woolworths is "big end of town" then mind boggles as to where anyone else sits on that scale. 

Fair and consistent tax reform? Sure that's a good idea.

Simply punishing anyone who's saved and invested for their own early retirement either voluntary or forced? No that's just being nasty playing games.


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## Junior (19 July 2019)

HelloU said:


> any journalists that are quoting figures from 2014 or pre 2018 tax year may have very little to contribute to the argument going forwards .... those figures do make very good copy though to get the attention of readers who do not understand the current legislation. Those figures cannot EVER be attained again by young aussies after recent legislation changes.
> 
> yes, dick smith may have $1.6M in pension phase and another $50M or whatever grandfathered  in accumulation phase but that is now essentially impossible for future peeps to do. Is the problem here with franking, or is it with grandfathering, or is it with untaxed income?
> 
> ...




Can anyone explain why the rules allow someone with more than $1.6mill in super, to retain the excess in accumulation phase?  I never understood the basis for that.  It grandfathers those handful of gigantic super balances like you've described above.  Make them withdraw it and have the funds taxed in another structure!

btw strongly agree that no journalists fully grasp the concept of franking credits, or the impact the rule changes already have on large super balances.  It was painful hearing people debate it, who don't really get it.


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## Klogg (19 July 2019)

Smurf1976 said:


> Where the issue arises is that the residential plumber, for example, almost certainly isn't doing any work at all for export and is only serving the local population.
> 
> In contrast anything from a foundry to a wool mill to a ship yard was making product either for export or as an alternative to imports. They were all bringing money into the country or were an alternative to sending it out whereas the plumber does nothing of that nature.




But that only matters when we're running Current Account Deficits - which we're currently not.
So long as we're not selling off the farm to buy Chinese electronics, then we can go into services all we want.


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## sptrawler (19 July 2019)

Klogg said:


> But that only matters when we're running Current Account Deficits - which we're currently not.
> So long as we're not selling off the farm to buy Chinese electronics, then we can go into services all we want.



In reality we are doing just that, we are selling finite raw material resources, to buy Chinese electronics.
Meanwhile the Chinese are buying our arable land, for farming and buying residential real estate( mainly in Sydney).


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## Klogg (19 July 2019)

sptrawler said:


> In reality we are doing just that, we are selling finite raw material resources, to buy Chinese electronics.
> Meanwhile the Chinese are buying our arable land, for farming.




We're extracting iron ore and coal to sell. I agree, it's finite, but this isn't the same as selling a productive asset (land, buildings or a business). The opportunity to add value is there, but hard to make profitable (the steel industry in Australia doesn't really have great economics)

Are you so sure we're selling to the Chinese? Check out foreign investment into Australia for 2018. China ranks 9th, even below Luxembourg:
https://dfat.gov.au/trade/resources...s/statistics-on-who-invests-in-australia.aspx


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## sptrawler (19 July 2019)

Klogg said:


> Are you so sure we're selling to the Chinese? Check out foreign investment into Australia for 2018. China ranks 9th, even below Luxembourg:
> https://dfat.gov.au/trade/resources...s/statistics-on-who-invests-in-australia.aspx



Is that by area or price? I did say farming, which to me is a productive asset.

https://www.smh.com.au/politics/fed...stake-in-australian-land-20181220-p50ng0.html

From the article:
Chinese investors have added another 50,000 hectares to their Australian property portfolio, taking the total area of property under Chinese control to more than 9.1 million hectares amid growing concerns over foreign interference and national security.

*China is now the second largest investor in Australian land and is within a million hectares of the top landholder, the United Kingdom*, as Canberra moves to tighten controls over foreign investors


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## Klogg (19 July 2019)

sptrawler said:


> Is that by area or price? I did say farming, which to me is a productive asset.
> 
> https://www.smh.com.au/politics/fed...stake-in-australian-land-20181220-p50ng0.html
> 
> ...




Fair, I was talking investment as a whole.

I was taking the macroeconomic viewpoint. If we're running a CAD, then we're funding it by issuing debt (likely in foreign currency), or selling assets. Since we're not doing that at the moment, then on balance we either own debt of other countries, or more of their assets.

Back to your point - I would be interested to see total available farmland vs foreign interests.
If I find something on Google I'll post it.


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## sptrawler (19 July 2019)

Klogg said:


> Fair, I was talking investment as a whole.
> 
> I was taking the macroeconomic viewpoint. If we're running a CAD, then we're funding it by issuing debt (likely in foreign currency), or selling assets. Since we're not doing that at the moment, then on balance we either own debt of other countries, or more of their assets.
> 
> ...



I wouldn't mind either, if our imports were mainly manufacturing equipment, but in reality it is nintendo's, gameboy's and t.v's. 
As for selling productive asset's, we do plenty of that, didn't aussie shareholders build 'connect east', rivercity motorway etc and then sell it cheap to a Canadian pension fund.
The great thing is, we can sit back and be smug, while we have the most raw materials with the cheapest extraction costs in the World.
When they are gone, we will really see how clever a Country, we really are.


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## Klogg (19 July 2019)

Klogg said:


> Fair, I was talking investment as a whole.
> 
> I was taking the macroeconomic viewpoint. If we're running a CAD, then we're funding it by issuing debt (likely in foreign currency), or selling assets. Since we're not doing that at the moment, then on balance we either own debt of other countries, or more of their assets.
> 
> ...




Well, according to Wikipedia there's 35m hectares of 'certified organic farmland' (whatever that means), implying a total of 398m hectares. The Chinese own 9.1m hectares, or 2.3%...

Doesn't really sound like we're selling much to them.


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## Klogg (19 July 2019)

sptrawler said:


> The great thing is, we can sit back and be smug, while we have the most raw materials with the cheapest extraction costs in the World.
> When they are gone, we will really see how clever a Country, we really are.




Very true. Norway have a resources boom and amass a huge list of investments with the proceeds. The current value of the Norwegian oil fund is now over $1trillion USD...

We on the other hand just have higher private debt and inflated housing prices to show for it.


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## sptrawler (19 July 2019)

Klogg said:


> Well, according to Wikipedia there's 35m hectares of 'certified organic farmland' (whatever that means), implying a total of 398m hectares. The Chinese own 9.1m hectares, or 2.3%...
> 
> Doesn't really sound like we're selling much to them.



Sounds like someone selling a 'bunny' to me.


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## sptrawler (19 July 2019)

Klogg said:


> Very true. Norway have a resources boom and amass a huge list of investments with the proceeds. The current value of the Norwegian oil fund is now over $1trillion USD...
> 
> We on the other hand just have higher private debt and inflated housing prices to show for it.




We also have a lot of Chinese trinkets, a bit like the American Indians, really.


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## Junior (19 July 2019)

Klogg said:


> Well, according to Wikipedia there's 35m hectares of 'certified organic farmland' (whatever that means), implying a total of 398m hectares. The Chinese own 9.1m hectares, or 2.3%...
> 
> Doesn't really sound like we're selling much to them.




2.3% now....how much was it 5 or 10 years ago, and what % will it be in the future?

How much Chinese farmland do Australians own?  I would suggest 0.0%.  They are smart enough to keep it under domestic ownership & control.


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## Klogg (19 July 2019)

Junior said:


> 2.3% now....how much was it 5 or 10 years ago, and what % will it be in the future?
> 
> How much Chinese farmland do Australians own?  I would suggest 0.0%.  They are smart enough to keep it under domestic ownership & control.




I don't have metrics on 5 or 10 years ago unfortunately. But I agree, it would be increasing, rather than decreasing.

The point wasn't specific to Chinese. It was about selling off assets to fund consumption.

To your point though - yes, the world consumed Chinese products and made them rich. But this isn't a bad thing, as it's not a zero sum game. In effect, we've increased the size of the pie by making them richer and more productive.

If I can find the right Charlie Munger video that emphasizes this point, I'll post it.


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## sptrawler (19 July 2019)

Klogg said:


> I don't have metrics on 5 or 10 years ago unfortunately. But I agree, it would be increasing, rather than decreasing.
> 
> The point wasn't specific to Chinese. It was about selling off assets to fund consumption.
> 
> To your point though - yes, the world consumed Chinese products and made them rich. But this isn't a bad thing, as it's not a zero sum game. In effect, we've increased the size of the pie by making them richer and more productive.



That only works while we have something to sell them, in the end, we will be serving them Bintang and driving them around in tuk tuk's, while they are here on holidays checking how the farm is going.


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## Smurf1976 (20 July 2019)

Klogg said:


> But that only matters when we're running Current Account Deficits - which we're currently not.



We might not be running one right now but Australia's net external debt is roughly double what it was a decade ago and is 6 - 7 times what it was 20 years ago so the trend's pretty clear and we could run an awful lot of surpluses before it came down to zero.


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