Dividend franking credits

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.

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?

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 .......

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.

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.

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).

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

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

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

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Dividend franking credits

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