Australian Federal Election - 2019

[rederob]

No one is touching the dividend, they are touching the company tax component of that dividend, company tax that is owed to the government. Your basically advocating no company tax with this policy.

True.
But as Bill M and others point out, there are transitioning consequences at the margin.
I wrote to Bill Shorten before the election and pointed out the problem that Bill M mentioned above. I suggested that to avoid it they add a "sweetener" for SMSFs which were marginal (ie, allow a relatively small quantum of imputation credits to be returned). I actually suggested the simplest treatment would be a cutoff after $18,200 (which is the tax free threshold - and is along smurf's post at #909). Thus, I proposed that SMSFs in the retirement phase allow all dividend income, plus up to an extra $18,200 being returned via imputation credits, which I reckon is pretty generous.
That's now history.

 

[overhang]

True.
But as Bill M and others point out, there are transitioning consequences at the margin.
I wrote to Bill Shorten before the election and pointed out the problem that Bill M mentioned above. I suggested that to avoid it they add a "sweetener" for SMSFs which were marginal (ie, allow a relatively small quantum of imputation credits to be returned). I actually suggested the simplest treatment would be a cutoff after $18,200 (which is the tax free threshold - and is along smurf's post at #909). Thus, I proposed that SMSFs in the retirement phase allow all dividend income, plus up to an extra $18,200 being returned via imputation credits, which I reckon is pretty generous.
That's now history.

It's probably a good starting point, I think the goal should have been to gradually phase out the tax credits. It's not a sustainable policy, currently costing us $5 billion annually and to be $8 billion soon, admittedly this figure does not account for those on the fringe who will move onto a partial pension or full pension.

 

[Toyota Lexcen]

Gee 5 billion a year from people who worked and built the country. Take it from the welfare expenditure at 170Billion

How much was Rudds wife getting in Gov money for trying to get people a job, or doing useless training.

It backfired, was beautiful to watch.Every campaign Labor just want to pinch your money.

 

[rederob]

It's probably a good starting point, I think the goal should have been to gradually phase out the tax credits. It's not a sustainable policy, currently costing us $5 billion annually and to be $8 billion soon, admittedly this figure does not account for those on the fringe who will move onto a partial pension or full pension.

In part.
The goal should be to get as many off pensions as possible and keep them off.
Labor's policy would have led to many smaller SMSFs quickly running out of money and falling back to the safety net of a government pension.
That's not fiscally clever.
And that's apart from Labor failing to do anything about the Bill M issue.
I definitely agree that a phasing out of the credit would have been a better way to go, providing it could be tweaked so that it remained advantageous for people to keep their SMSFs as their primary means of retirement income.

 

[rederob]

Gee 5 billion a year from people who worked and built the country. Take it from the welfare expenditure at 170Billion

Just be aware that the majority is from very wealthy people who used their money to make money, and not their labour.
But keep posting please, as it shows us why sensible tax reform is difficult when so many cannot work out how it all fits together.

 

[HelloU]

tricky rob, cos welfare goes to peeps who have not used any labour ....... to attribute a "value" to money (in a tax view) based on the "effort" involved is a big thinking change for oz.

 

[HelloU]

i tend to think the opposite ....
i reckon everyone should get the pension (non means tested) and all other income just gets taxed at individual rates (no super). That does not solve the franking credit refund question but it gets rid of a fair bit of the "problem".

issues to sort with that though ...

 

[overhang]

Gee 5 billion a year from people who worked and built the country. Take it from the welfare expenditure at 170Billion

How much was Rudds wife getting in Gov money for trying to get people a job, or doing useless training.

It backfired, was beautiful to watch.Every campaign Labor just want to pinch your money.

Well over 50 billion of that already goes to those that worked and built the country. I don't see that those who receive that 6 billion have worked harder than the others, certainly smarter. But I look at a work colleague who has worked his ass off his whole life and at 60 could only dream of a nest egg that would net him a welfare bonus from the taxpayer that would allow him to retire early.

I noticed you missed Dutton wife in your little rant who receives gov money to run childcare centers.

 

[HelloU]

How did this couple get their savings down from 1 million to 150k? Is part of those savings counting their tax free super? Of that savings it sounds like only about 300k or so was invested in shares.

The policy was not without it's flaws, it should have been means tested and it should have been grandfathered in and slowly phased out. I would sympathize with those who have planned their whole retirement based on the franking credits as an income stream only to have the rug pulled out from under them.

But I would still like to point out it is a form of welfare, it's removed tax owed to the government by the way of company tax and given it to an individual, tax payers are subsidising these individuals. So like I said it's quite ironic that there are many on here with the nerve to attack a welfare state while simultaneously enjoying a retirement that is part paid by the tax payers purse.

hey
to me, ur argument of govt's keeping company tax is valid and logical ...... but the idea that all individuals use the same tax scales consistently is also valid and logical (conundrum)

a broad question for you (not a trap),
the aussie govt gets a certain amount of net tax income right now.
should this level of total tax be increased?, or if the govt was to suddenly get more tax income should they lower the taxes somewhere else to maintain current tax take levels?
(easy answer is to pay off debt - not what i am trying to find out - i am more interested in the thought process of "too much tax is never enough" versus "1cent tax is too much" type of thinking)

the franking credit debate does NOT involve peeps talking about how companies transfer franking credits between themselves to negate further taxation on "profits"...... I also wonder how the discussion would change if the top individual tax rate was less than the company rate. take that as a comment.

 

[rederob]

hey
to me, ur argument of govt's keeping company tax is valid and logical ...... but the idea that all individuals use the same tax scales consistently is also valid and logical (conundrum)

That would be logical if gross income was taxed.
But net income is taxed.
So someone earning $500k might be paying less tax than someone earning $50k because they are using other features of the tax system to reduce their taxable income, like negative gearing.

 

[HelloU]

That would be logical if gross income was taxed.
But net income is taxed.
So someone earning $500k might be paying less tax than someone earning $50k because they are using other features of the tax system to reduce their taxable income, like negative gearing.

with a little fear of a derail to the discussion ....... ur point is entirely valid but i will make the point that companies also pay tax on net (profits) and not on gross (turnover) ....... so the treatment of income for individuals is consistent with that for the income of companies by using a net figure. Not sayin there are not loopholes, just sayin the approach is the same.

comment: will also say, it is not unusual for a company to make a loss (so pay no company tax on profits) but then pay a dividend (sometimes increased) to owners and that dividend comes with credits attached (fully franked). that is how the franking system works. i reckon the tax system needs a higher level review, and all this stuff being discussed is "deck chairs on the titanic" type talk. (example, How come some can get an immediate $20K tax deduction and others have to dribble the deduction over 3 years for the exact same capital items).

 

[HelloU]

That would be logical if gross income was taxed.
But net income is taxed.
So someone earning $500k might be paying less tax than someone earning $50k because they are using other features of the tax system to reduce their taxable income, like negative gearing.

not sure if this will help but to clarify some of my post ......
the current system allows the transfer of credits between tax entities (imputation).

i think if this transfer is allowed then ALL tax entities should get equal access to the same transfer entitlement (i do not like complicated if/then/but/else type systems).

if the government does not want franking credits to transfer to other tax entities then they should just stop the ability to transfer. this basically means do not allow companies to transfer credits between themselves and do not include credits as part of the assessable income for individuals or super accounts. that is, treat all tax entities as separate tax paying entities that have their own tax owing on their own "profits".

(for those about to talk double taxation - if the company retains its profits and further grows the company then the company owners have an increased asset value and they have NOT paid any individual tax - so no double taxation - always choices to be made by directors and owners)

 

[Logique]

Why would we have elected a shadow PM & Treasurer who either:
- didn't understand imputation credits, or
- weren't telling the truth about them

I think low-salary earning PAYE workers realized they were next in line to be denied their withholding tax. "..You're not paying any tax, why should we give you a tax refund" ..they'd have been told.

Labor's proposed franking credit policy was regressive and dishonestly presented. Worst of all it would have hit poorer people the most.

We dodged the bullet of 'Chris Bowen-omics', and the relief was palpable. Away from the Ultimo latte cafes that is (they'd all have gotten franking credits)

 

[sptrawler]

If the fund is fully in accumulation phase, and has a marginal tax rate of 15%, this $1,000 of income would be deemed to have a tax liability of $150 and the $150 already paid by the company would be refunded. So in accumulation the earnings are $1,150 and not $1000.
Concessional tax treatment is a reason some people have SMSFs.
In my SMSF a portion has been allocated to accumulation and another to pension, so it's not simple.
WayneL's claim related to wage earners who have very different tax arrangements.

If I use your example, the the situation is actually sillier, because in pension phase you were going to lose the franking credit, therefore:
In accumulation the earnings are $1150.
In pension phase the earnings are $1,000.

 

[HelloU]

If I use your example, the the situation is actually sillier, because in pension phase you were going to lose the franking credit, therefore:
In accumulation the earnings are $1150.
In pension phase the earnings are $1,000.

not going back thru the posts/maths but my head says that in both those cases the end result would have been (under labor) the same end balance for the 2 funds. ($1K fund balance increase)


(if all that 300 was credits) ???? but my head hurts

 

[sptrawler]

How did this couple get their savings down from 1 million to 150k? Is part of those savings counting their tax free super? Of that savings it sounds like only about 300k or so was invested in shares.

They could simply get it down, by removing $850 and upgrading their house, which is probably how they got it to $1m in the first place, I know I did.

The policy was not without it's flaws, it should have been means tested and it should have been grandfathered in and slowly phased out. I would sympathize with those who have planned their whole retirement based on the franking credits as an income stream only to have the rug pulled out from under them.

Most people I know, including myself has done this, with interest rates at 2% how else can a reasonable income be achieved?

But I would still like to point out it is a form of welfare, it's removed tax owed to the government by the way of company tax and given it to an individual, tax payers are subsidising these individuals. So like I said it's quite ironic that there are many on here with the nerve to attack a welfare state while simultaneously enjoying a retirement that is part paid by the tax payers purse.

I would like to point out as I did earlier, it is better to give partial assistance, than to carry the whole burden.
With the Governments plan, a smsf pension couple with say $500k in term deposit and $500k in shares, they would earn $10k from term dep and $21k at 4.2% dividend return = $31k.

On a full pension with $200k in shares earning 4.2%, they would earn $36.6k pension + $8.4k div + $2.5k franking = $47.5k

All ball park figures, just to show the ludicrous effect, absolutely dumb politics. Unless you want everyone on welfare.

 

[SirRumpole]

I think low-salary earning PAYE workers realized they were next in line to be denied their withholding tax. "..You're not paying any tax, why should we give you a tax refund" ..they'd have been told.

Is that the latest social media lie after the "death tax" ?

 

[sptrawler]

not going back thru the posts/maths but my head says that in both those cases the end result would have been (under labor) the same end balance for the 2 funds. ($1K fund balance increase)


(if all that 300 was credits) ???? but my head hurts

As I stated in post #908 and rederob seemed to disagree with.

 

[PZ99]

Is that the latest social media lie after the "death tax" ?

Death tax versus Mediscare. I'd call that a draw

 

[sptrawler]

Is that the latest social media lie after the "death tax" ?

Actually Rumpy, the death tax came from the ACTU, from memory. When Labor announced the new policies, the ACTU suggested a death tax would a better way of addressing the issue.