How to avoid Shorten's plan to abolish the refund of excess franking credits

[boofhead]

If the Coalition get their corporate tax cuts through the people that get the franking credits will also have their franking credits reduced. Not sure why Labor didn't make something more of it.

 

[SirRumpole]

did I mis read this (maybe u meant tax on the income being produced whilst capital remains in the fund?) I maintain that the capital held in super has already has been taxed as income years earlier. And thus should be exempt from income tax when drawn down out of the fund.

As I understand it super contributions are only taxed at 15% , so the full marginal tax on those inputs has not been paid, so maybe a discounted tax rate on earnings could apply.

 

[SirRumpole]

As I understand it super contributions are only taxed at 15% , so the full marginal tax on those inputs has not been paid, so maybe a discounted tax rate on earnings could apply.

Sorry, I should have said marginal tax rates on earnings, discounted tax rate on capital withdrawals.

 

[HelloU]

true again, prolly something to do with MY money (in lieu of in hand wage rise) as a 20 year old worker will be locked away for 40+ years...............do u really want to lock up someones money for more than 40 years and take away concessions for this?

 

[HelloU]

btw, I am no fan of super...I think it distorts the economy and taxation base......but for another day.

 

[moXJO]

So this situation exists in all but 3 of the countries in the world without dividend imputation and they accept it as a fact of life.

Australia has had no recession for over 20 years (not that its entirely good thing).
One of only 2 countries I think. Maybe we have it right and everyone else has it wrong.
Why the hell are you looking to other countries without taking their tax system as a whole into account.

 

[SirRumpole]

One of only 2 countries I think. Maybe we have it right and everyone else has it wrong.

China, iron ore & coal exports.

Worst ever international debt. Debt and deficit disaster remember ? That's what you get when you have mile wide tax loopholes.

 

[Value Collector]

So this situation exists in all but 3 of the countries in the world without dividend imputation and they accept it as a fact of life.

They generally have lower tax rates for dividends, eg in the USA tax on dividends is limited to 15%.

Also, that is a reason why in countries such as the USA dividends are quite small, with most companies preferring to buy back stock instead of pay dividends.

It's a big factor in why Berkshire Hathaway hasn't paid a dividend in 50 years.

 

[SirRumpole]

They generally have lower tax rates for dividends, eg in the USA tax on dividends is limited to 15%.

Also, that is a reason why in countries such as the USA dividends are quite small, with most companies preferring to buy back stock instead of pay dividends.

It's a big factor in why Berkshire Hathaway hasn't paid a dividend in 50 years.

So how is this a benefit to shareholders ?

 

[Value Collector]

So how is this a benefit to shareholders ?

How is what a benefit?

 

[SirRumpole]

hat a benefit?

The fact that a company hasn't paid a dividend in 50 years.

 

[Value Collector]

The fact that a company hasn't paid a dividend in 50 years.

In Berkshires case the share price has risen from $6 per share to $290,000, by retaining all the earnings.

But, my point is simply that if companies know that as soon as they hand over the dividend check to share holders it will be taxed at 15%, there is an argument that it is not tax efficient to pay dividends.

So a lot of American companies avoid paying dividends or pay only token dividends, because they think it is better for the share holder for them to hold on to the funds and reinvest them or use the cash to buy back the companies shares, rather than have the share holder be subject to a 15% tax.

eg. If you get paid $100 in dividends, you must then pay $15 tax, so you only have $85.00 available to reinvest.

However if the company just bought back $100 of its own shares or made some other investment rather than pay you the dividend, the full $100 should accrue to your benefit.

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I much prefer the Australian system.