That's not really true, it is any average wage earner, who has their head screwed on.
But you believe what you like, I know from working in a workshop most of my life, all the guys used negative gearing.
The ones who did well, also bought shares in their non working wife's name also.
Franking credits and 50% capital gains tax discounts are important measures designed to prevent double taxation, Without them the shareholders will be unfairly taxed twice on their earnings.
eg, If a company earns $100, it will pay $30 in tax leaving $70 that can be paid as a dividend to the company owner/share holder, When that shareholder gets the $70 if you tax him on it, he may pay another $31.50 in tax.
Meaning that $100 company profit ends up being taxed at 61.5% by the time the share holder/owner get the profit in their pocket, that is simply not a fair tax rate.
By allowing the share holder to have the franking credit for the tax already paid at the company level it means the company profits just get taxed at the tax bracket of the individual share holder, which is a much fairer system.
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Same with capital gains discount, the "capital gain" is often the result of the company retaining after tax profits and reinvesting them,
eg. IF company earns $100M, pays $30M in tax and retains $70Million, its market cap will probably increase by $70Million, when a long term shareholder sells and gets a "capital gain", its partly due to the after tax profit the company retained which has already been taxed at the company level, charging the investor tax on the full capital gain will result in double taxation.
I guess the issue which does need addressing is where so many shareholders are on a MTR of less than 30% (0% for pensioners) and claiming refunds.....a proportion of those company profits effectively aren't taxed at all.
So the Franking credits are an efficient way of making sure each person is only taxed at their appropriate tax rate, and not double taxed.
Its already been explained a few times.Double taxation is a bit of a furphy, when normal taxpayers are taxed on both income and spending, we are all double taxed anyway so I don't see why share income is any different.
Remember we are one of only three countries (+ New Zealand and Malta) where full dividend imputation exists at all.
1. Double taxation is a bit of a furphy, when normal taxpayers are taxed on both income and spending, we are all double taxed anyway so I don't see why share income is any different.
2. Remember we are one of only three countries (+ New Zealand and Malta) where full dividend imputation exists at all.
So just remember removing the tax credits only hurts low income earners with investments, eg those trying to build savings or those of limited means trying to be partially self funded.
I'm not saying imputation should be removed, just that taxpayers should be grateful that it exists at all, but that it allows high income earners a significant benefit and in these days of a budget deficit it can be wound back a bit for the sake of a financial saving for the budget.
What do you think is a fair tax rate on earnings?
A fair tax system is one where people actually pay tax not avoid it.
If more people/companies paid tax the overall rate could be lower.
Do you not think that many sole traders, partnerships and employees dodge tax? Why single out just the company structure to be double taxed?
But getting a refund of taxes you haven't paid is absurd. .
Who gets a refund for taxes they haven't paid?
The biggest losers from Mr Shorten's proposals will be individuals who pay little or no tax, given that the ability to use franking credits to offset taxable income will remain intact.
But getting a refund of taxes you haven't paid is absurd.
So your claim that they are getting a refund of money they haven't paid is bogus
Thanks for articulating it well VC.Your claim was that there are people claiming back tax that they haven't paid, you said this
No one is claiming back tax they haven't paid.
Low income earners are simply claiming back the taxes they have already paid at the company level, but don't have to pay because their earnings are lower than the $18,000 tax free threshold.
It works like this.
1, The company earns $100, then pays $30 in tax.
2, The shareholder then gets a dividend of $70 cash + ($30 franking credit).
3, Shareholder declares the full $100 earnings on their Tax form ($70cash + $30 tax credit).
4, Government sees they have only earned $100, which is under the $18,000 tax-free threshold so they refund the $30 they had previously taken from the $100.
So the $30 refund is coming from the $30 tax they have already paid to the government on their $100 of earnings, but aren't required to pay because their total earnings are under the Tax free threshold.
So your claim that they are getting a refund of money they haven't paid is bogus
Semantics. Someone over 60 getting $100k in super tax free also gets a refund of franking credits doesn't pass the pub test.
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