How to retire early... or simply survive

[Value Collector]

For every seller of Aus shares there must be a buyer. Zero sum game. A chance for others to get good value.

Yeah, and the buyers that will come in to fill the vacuum will be foreigners, most Aussies already complain about to much foreign ownership, taking away a chunk of the retirement savings will just make it easier for more companies to be sold to foreigners

 

[SirRumpole]

Yeah, and the buyers that will come in to fill the vacuum will be foreigners, most Aussies already complain about to much foreign ownership, taking away a chunk of the retirement savings will just make it easier for more companies to be sold to foreigners

So remove dividend franking for foreigners.

 

[Value Collector]

...And companies shouldn't pay tax because...

Companies are just conduit from which individuals can make investments.

I think charging a 30% tax on profits retained by the company and reinvested to maintain or grow the company is Fair.

While I also think the portion of those profits that get paid out to the individuals as dividends should be tax at the persons tax rate, which ranges from 0% to 45% depending on that persons situation.

The current system achieves exactly that, the profits paid out are taxed at the individuals tax rate, while those retained are taxed at 30%.

I really see no difference between a bond holder taking advantage of his $18,000 tax free threshold and a share holder doing the same.

 

[Value Collector]

So remove dividend franking for foreigners.

thats not my point.

My point is that if you do something that makes a large amount of Aussie investors turn away from owning companies, then naturally the vacuum will be filled by foreigners, meaning the company tax might stay here, but the rest of the dividend will flow over seas, funding the retirements of foreigners.

Imagine that, the government having to spend more to fund pensions, while those pensions are spent at Coles and woolies, where the profits are funding the retirement accounts in USA, China and Europe.

 

[PZ99]

So remove dividend franking for foreigners.

I thought they weren't entitled to them anyway?

They just get paid the unfranked amount and make their own arrangements

 

[Junior]

Companies are just conduit from which individuals can make investments.

I think charging a 30% tax on profits retained by the company and reinvested to maintain or grow the company is Fair.

While I also think the portion of those profits that get paid out to the individuals as dividends should be tax at the persons tax rate, which ranges from 0% to 45% depending on that persons situation.

The current system achieves exactly that, the profits paid out are taxed at the individuals tax rate, while those retained are taxed at 30%.

I really see no difference between a bond holder taking advantage of his $18,000 tax free threshold and a share holder doing the same.

Genuine question:
Do we want our public companies to reinvest the majority of profits, to invest in people and expand their operations, or provide incentive to pay profits out to dividend-hungry shareholders who want the tax credits?

 

[McLovin]

How does it do that?

By handing back tax paid by the company to shareholders.

 

[Value Collector]

Do we want our public companies to reinvest the majority of profits, to invest in people and expand their operations, or provide incentive to pay profits out to dividend-hungry shareholders who want the tax credits?

It still makes sense for earnings to be retained if sound investments are available, because money can be compounded inside the company at 30% tax rate, where as the largest shareholders will still pay 45% tax even with franking credits.

But,

Ask the woolies shareholders if they would have preferred dividends instead of the company sinking Billions into Masters, incentivising investments over dividends might not work out either, as I said a balance is needed, the current system provides that.

 

[Value Collector]

By handing back tax paid by the company to shareholders.

Thats only to low income earners below the $18,000 tax free threshold.

As I said I would be ok getting rid of the tax free threshold if thats what the government wants to do, but only targeting one source of earnings is silly to me.

do you really think its fair to treat a bond holder differently from a shareholder?


I think my statement from above is correct.

Companies are just conduit from which individuals can make investments.

I think charging a 30% tax on profits retained by the company and reinvested to maintain or grow the company is Fair.

While I also think the portion of those profits that get paid out to the individuals as dividends should be tax at the persons tax rate, which ranges from 0% to 45% depending on that persons situation.

The current system achieves exactly that, the profits paid out are taxed at the individuals tax rate, while those retained are taxed at 30%.

I really see no difference between a bond holder taking advantage of his $18,000 tax free threshold and a share holder doing the same.

 

[McLovin]

Companies are just conduit from which individuals can make investments.

I think charging a 30% tax on profits retained by the company and reinvested to maintain or grow the company is Fair.

While I also think the portion of those profits that get paid out to the individuals as dividends should be tax at the persons tax rate, which ranges from 0% to 45% depending on that persons situation.

The current system achieves exactly that, the profits paid out are taxed at the individuals tax rate, while those retained are taxed at 30%.

If a company makes $1b/year, why should it pay no tax because it happens to be owned by a bunch of retirees? It's a for profit enterprise that uses all the public services afforded by the state (roads, rails, ports and on and on), relies on the education system to turn out a literate workforce, benefits from the rule of law and the enforcement of contracts.

 

[McLovin]

do you really think its fair to treat a bond holder differently from a shareholder?

How are they being treated differently? Both receive the tax free threshold.

 

[Value Collector]

If a company makes $1b/year, why should it pay no tax because it happens to be owned by a bunch of retirees? It's a for profit enterprise that uses all the public services afforded by the state (roads, rails, ports and on and on), relies on the education system to turn out a literate workforce, benefits from the rule of law and the enforcement of contracts.

let me change three words and see if you can understand my point.

If a Bond issue makes $1b/year in interest, why should it pay no tax because it happens to be owned by a bunch of retirees? It's a for profit enterprise that uses all the public services afforded by the state (roads, rails, ports and on and on), relies on the education system to turn out a literate workforce, benefits from the rule of law and the enforcement of contracts

 

[Value Collector]

How are they being treated differently? Both receive the tax free threshold.

Bond holder earns $18,000 in interest - Pays zero tax

Shareholder earns $18,000 in profit - pays $5,200 in tax

 

[McLovin]

let me change two words and see if you can understand my point.

If a Bond issue makes $1b/year in interest, why should it pay no tax because it happens to be owned by a bunch of retirees? It's a for profit enterprise that uses all the public services afforded by the state (roads, rails, ports and on and on), relies on the education system to turn out a literate workforce, benefits from the rule of law and the enforcement of contracts

Your point makes no sense.

 

[Junior]

let me change two words and see if you can understand my point.

If a Bond issue makes $1b/year in interest, why should it pay no tax because it happens to be owned by a bunch of retirees? It's a for profit enterprise that uses all the public services afforded by the state (roads, rails, ports and on and on), relies on the education system to turn out a literate workforce, benefits from the rule of law and the enforcement of contracts

A bond issue is not a for-profit enterprise. It's a means by which to raise capital. If the bond-issuing company uses that capital and generates a profit using those funds, then company tax will apply. If it uses some of those funds to pay wages, then income tax will apply also.

 

[McLovin]

Bond holder earns $18,000 in interest - Pays zero tax

Shareholder earns $18,000 in profit - pays $5,200 in tax

Did the shareholder earn it or did the company earn it? You can push the ridiculous argument that they are one and the same, and I'll believe it when I see a shareholder on the hook for a company's liabilities.

 

[Value Collector]

Your point makes no sense.

It makes perfect sense.

The Bond holders of Woolworths, would be able to pay 0% tax on their portion of the companies output paid to them as Bond interest if they are below the tax free threshold.

Where as the share holders of Woolworths have their share of the companies output taxed at 30%, even if they were below the tax free threshold.

 

[McLovin]

It makes perfect sense.

The Bond holders of Woolworths, would be able to pay 0% tax on their portion of the companies output paid to them as Bond interest if they are below the tax free threshold.

Where as the share holders of Woolworths have their share of the companies output taxed at 30%, even if they were below the tax free threshold.

Why would a company pay tax on an expense? It's getting stranger and stranger.

Let me lay it out really easy; imputation is a form of dividend tax, not company tax. It's a tax on shareholders, not a tax on company profits. They're separate taxes that are, in very limited jurisdictions, related through imputation. You need to stop looking at the form of imputation and concluding that it represents some sort of merging or union between shareholders and the company.

 

[Junior]

It makes perfect sense.

The Bond holders of Woolworths, would be able to pay 0% tax on their portion of the companies output paid to them as Bond interest if they are below the tax free threshold.

Where as the share holders of Woolworths have their share of the companies output taxed at 30%, even if they were below the tax free threshold.

The debate isn't about shareholders receiving franking credits and using those credits to ensure they aren't taxed twice.

The debate is about whether shareholders, including SMSFs, should be able to receive a tax refund of excess franking credits or not.

 

[Value Collector]

It's a means by which to raise capital.

So are shares.

Both Bonds and Shares are securities issued to investors to raise capital for a company, both are stake holders in the company.

Bonds take a share of the companies out put as fixed interest.
Shares take a share of the companies out put as a variable dividend.

If the bond-issuing company uses that capital and generates a profit using those funds, then company tax will apply.

I have no problem with that.

If it uses some of those funds to pay wages, then income tax will apply also.

Employees get a tax refund if their personal earnings end up being below $18,000.

Do you have a problem with employees getting a tax refund?