Australian (ASX) Stock Market Forum

Labor's proposed franking credit changes

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IFocus said:
How Dividend Imputation Is Applied Around the World
Taxpayers in countries wherein dividend imputation is offered will typically claim the appropriate credit when filing their taxes.


Dividend imputation has had a mixed history among different nations, as the circumstances of each country’s tax system prompt varying applications. Nine countries that once offered such an arrangement have either changed or ended the practice. These countries include the following:


  • United Kingdom
  • Ireland
  • Germany
  • Singapore
  • Italy
  • Finland
  • France
  • Norway
  • Malaysia

The United Kingdom and Ireland, for example, previously offered partial imputation with tax credits that were, effectively, portions 12 cents to 25 cents on each dollar. The partial imputation in the United Kingdom provided a 20 percent refund against a 33 percent corporate tax rate. Starting in 1997, however, the government moved away from this, first by eliminating the refund to tax-exempt shareholders that includes pension funds. Then, in 1999, the refund rate was cut to 10 percent.


Germany, Finland, Norway, and France all previously offered full dividend imputation. France offered tax credits equal to 50 percent of the face value of the dividend. After the repeal, these countries taxed dividends at a rate of 50 percent or greater. Germany did away with its dividend imputation program with the intent of reducing the nation’s tax rate. Finland, likewise, lowered its corporate tax rate after dividend imputation as repealed. Norway, on the other hand, did not lower its corporate tax rate when dividend imputation ended.
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That seems like good information. How about New Zealand, our closest neighbour, where I understand there is still franking credit but I don't think there is cash refunds ? Please advise.
 
It is the franking credit and negative gearing changes, most seem comfortable with, but also there appears to be a genuine concern for the plight of those on welfare, hospitals and education.
Which from my point of view, none of the plights seem to improve, no matter how much money is thrown at it.
But on a more general note, I think a lot of the younger generation, don't appreciate how difficult it is for them to become financially comfortable.
The new rules being proposed by labor, will make it much more difficult in the future, as you say once they see the accountant a few times it will sink in. IMO
But as you pointed out I have posted an lot on the subject, so I had better let it go, everything has been said that could be said. IMO
 
sptrawler said:
But as you pointed out I have posted an lot on the subject, so I had better let it go, everything has been said that could be said. IMO
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Time will tell how it all plays out and my thought is it's a gamble.

Tax something and you get less of it. I don't think too many would argue with that notion as it seems a pretty well accepted concept with everything from health to environmental policy. If something's considered to be bad then tax it and end result is people use / do less of it.

It thus follows that taxing self-funded retirees means we'll end up with fewer self-funded retirees. Seems a reasonable conclusion - taxing something discourages it.

What they do with the money instead will determine the outcome in my view. Only time will tell where the money ends up. :2twocents
 
shortentaxlosers.com.au said:
May I ask , what's the point in owning shares if Shorten wants 75% of your profit in your tax return?
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I'm just going to expand on this point, 75% of your profit in your tax return. 75% of your gain is assessable income. So if you take a retiree for example, who sells a property to help fund their retirement, and makes a profit of $300,000 on the sale. 75% of $300,000 will be assessed: $225,000

Tax on 225,000 = 78,847 (assuming no other assessable income for the year)

So Shorten has taken 26% of your profit in this example.

Let's look at the same case, for a high income earner who also makes a profit of $300,000. If he was on the top MTR he would pay tax on this gain of $110,250. This is the 'worst case scenario', i.e. the most tax you could possibly pay on a capital gain.

In this example, Shorten has taken 37% of the gain. (compared to 25% under the current CGT rules)

It's a big tax hike and I absolutely do not agree with the changes, but let's put it in perspective, but it's not the end of civilisation as we know it. You would still have capital gains taxed at only 15% through super and 0% in a pension.
 
Junior said:
I'm just going to expand on this point, 75% of your profit in your tax return. 75% of your gain is assessable income. So if you take a retiree for example, who sells a property to help fund their retirement, and makes a profit of $300,000 on the sale. 75% of $300,000 will be assessed: $225,000

Tax on 225,000 = 78,847 (assuming no other assessable income for the year)

So Shorten has taken 26% of your profit in this example.

Let's look at the same case, for a high income earner who also makes a profit of $300,000. If he was on the top MTR he would pay tax on this gain of $110,250. This is the 'worst case scenario', i.e. the most tax you could possibly pay on a capital gain.

In this example, Shorten has taken 37% of the gain. (compared to 25% under the current CGT rules)

It's a big tax hike and I absolutely do not agree with the changes, but let's put it in perspective, but it's not the end of civilisation as we know it. You would still have capital gains taxed at only 15% through super and 0% in a pension.
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I find that really interesting, a 12% increase in a tax, isn't the end of civilization as we know it.
Just shows how affluent we are.
So if we increased GST by 12% it really isn't a problem?
Or are we saying who gives a $hit, as long as the increase only affects a few, as long as it isn't me.lol
 
sptrawler said:
So if we increased GST by 12% it really isn't a problem?
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Simply applying the GST as it was originally intended, that is to everything with no exceptions, would have plenty of people up in arms due to loss of their tax exemption the existence of which directly cuts funding for schools and the like given that GST revenue goes to the states. :2twocents
 
Has anybody read the latest news on Industry Super funds, apparently there is a bit of an issue of an executive getting a $36m bonus, some IFM investment company. Greg Combet, you know the ex Labor minister and ACTU secratary, is making no comment. Sounds like there might be an AMP moment coming up.lol
 
Junior said:
I'm just going to expand on this point, 75% of your profit in your tax return. 75% of your gain is assessable income. So if you take a retiree for example, who sells a property to help fund their retirement, and makes a profit of $300,000 on the sale. 75% of $300,000 will be assessed: $225,000

Tax on 225,000 = 78,847 (assuming no other assessable income for the year)

So Shorten has taken 26% of your profit in this example.

Let's look at the same case, for a high income earner who also makes a profit of $300,000. If he was on the top MTR he would pay tax on this gain of $110,250. This is the 'worst case scenario', i.e. the most tax you could possibly pay on a capital gain.

In this example, Shorten has taken 37% of the gain. (compared to 25% under the current CGT rules)

It's a big tax hike and I absolutely do not agree with the changes, but let's put it in perspective, but it's not the end of civilisation as we know it. You would still have capital gains taxed at only 15% through super and 0% in a pension.
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9 EXPAT-FRIENDLY COUNTRIES WITH NO CAPITAL GAINS TAXES
https://nomadcapitalist.com/2014/04/06/top-5-expat-friendly-countries-with-no-capital-gains-taxes/

3. NEW ZEALAND
New Zealand isn’t called heaven on Earth just because of its stunning nature and scenery. It has one of the very few truly free economies on the planet and you can forget about capital gains taxes here.


 
PZ99 said:
If I had a million dollars in or out of super I can assure you the last thing I'll be worrying about is refunding franking credits. But I suspect my situation will be quite different.
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Yeah probably have not run the numbers, you will be stuck paying 30% tax while your peers in other asset classes and jobs will only pay 20% tax, doesn’t seem fair.

But if you got a refund, your total tax would drop back to the 20% that every one else is paying that earns the same as you.

If you had $1 Million in shares, you would be getting around $50,000 in dividends, and would be stuck paying paying 30% tax on the grossed up amount of $70,000 that hits your tax return.

All the while some one else earning $70,000 in bank interest or rental property, or share trading will only be paying 20% tax.
 
sptrawler said:
I find that really interesting, a 12% increase in a tax, isn't the end of civilization as we know it.
Just shows how affluent we are.
So if we increased GST by 12% it really isn't a problem?
Or are we saying who gives a $hit, as long as the increase only affects a few, as long as it isn't me.lol
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It should be viewed in the context of their overall tax policy. Clearly some taxes will be cut, whilst others will rise. Honing on one tax, how it affects one type of taxpayer, and ignoring where the additional revenue will be spent isn't the way to go about it.

I would fully support a 12% increase in GST, if that tax increase came at the same time as equivalent cuts to income and company tax rates across all income brackets.
 
Value Collector said:
Yeah probably have not run the numbers, you will be stuck paying 30% tax while your peers in other asset classes and jobs will only pay 20% tax, doesn’t seem fair.

But if you got a refund, your total tax would drop back to the 20% that every one else is paying that earns the same as you.

If you had $1 Million in shares, you would be getting around $50,000 in dividends, and would be stuck paying paying 30% tax on the grossed up amount of $70,000 that hits your tax return.

All the while some one else earning $70,000 in bank interest or rental property, or share trading will only be paying 20% tax.
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$70,000 in bank interest from a million dollars ? LOL

Put it this way VC - if you stopped the taxpayer funded gravy train that hands out money frivolously then chances are I wouldn't be slugged with that 30% tax in the first place.

And neither would all those employers hence better profits and dividends yeah?

For the record - I get far better returns from trading than from dividends.

50/50 ratio in the portfolio :)
 
PZ99 said:
$70,000 in bank interest from a million dollars ? LOL

Put it this way VC - if you stopped the taxpayer funded gravy train that hands out money frivolously then chances are I wouldn't be slugged with that 30% tax in the first place.

And neither would all those employers hence better profits and dividends yeah?

For the record - I get far better returns from trading than from dividends.

50/50 ratio in the portfolio :)
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Just make a flat 30% tax on every dollar for every one then.

why pick out shareholders to be the only ones with a minimum of 30% tax
 
PZ99 said:
For the record - I get far better returns from trading than from dividends.
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So why should you get your first $19,000 of trading profit tax free.

While a business owner has to pay a minimum of 30% tax on every dollar they earn.
 

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