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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.
Dividend franking credits
- Thread starter Joel1st
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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.
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)
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)
Bill M
Self Funded Retiree
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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.
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?
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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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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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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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?!?
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?!?
Bill M
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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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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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How will the end of franking credits affect the behaviour of the market? Will non-div stocks attract more moola?
Bill M
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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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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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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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It is much easier to control people who are wage slaves, than financially independent workers.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.
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.
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.
bigdog
Retired many years ago
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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.
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.
‘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.
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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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'.
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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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.
Value Collector
Have courage, and be kind.
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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
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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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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