Labor's proposed franking credit changes

[PZ99]

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.

I don't care if my first or last $19,000 of trading profit is not tax free.

I also believe your "minimum of 30% tax" is not correct.

 

[Value Collector]

I don't care if my first or last $19,000 of trading profit is not tax free.

I also believe your "minimum of 30% tax" is not correct.

Profits earned on investors capital inside a company, are subject to a 30% company tax.

When those profits are eventually distributed back to shareholders, they get tax according to the marginal rate.

By disallowing a franking credit refund to a person who’s marginal rate is less than 30%, you are making them pay a minimum of 30% tax (because that is what has already been paid on their earnings)

Where as if they earned the money in any other employment or investment they would would only have to pay tax at their marginal rate, which could be less than 30%.

you could earn over $100k as a trader and still pay less than 30% tax, while long term share holder earning only $10k is subject to a minimum of 30% if they can’t access a refund.

 

[Value Collector]

If my effective tax rate ends up brings 40% on my dividends, the government is very quick to ask me to pay the additional 10% tax to make up the difference between my 30% already paid franking credits and the 40% effective rate I owe.

So I see it as a bit dishonest for them not to provide a refund of 10%, to some one who’s effective rate turns out to be only 20%, while people earning the same amount as them from other sources only have to pay the 20%

 

[PZ99]

Profits earned on investors capital inside a company, are subject to a 30% company tax.

When those profits are eventually distributed back to shareholders, they get tax according to the marginal rate.

By disallowing a franking credit refund to a person who’s marginal rate is less than 30%, you are making them pay a minimum of 30% tax (because that is what has already been paid on their earnings)

Where as if they earned the money in any other employment or investment they would would only have to pay tax at their marginal rate, which could be less than 30%.

you could earn over $100k as a trader and still pay less than 30% tax, while long term share holder earning only $10k is subject to a minimum of 30% if they can’t access a refund.

That doesn't mean a "business owner" pays 30% tax. Sole traders don't pay 30% tax.

I'm not quite sure where you're going with all this... my statement you quoted was that if I was investing a million dollars then I wouldn't worry about franking credits.
I wouldn't have to. Why would I? Would I? I wouldn't. That's because I expect my ROI to put me in a comfortable enough position to not worry about franking credits

In any case I haven't said in this thread that I support low income earners loosing their credits.

I was just pulling up the OP for spinning conspiracy theories and false logic. It's one of the reasons why someone else reported this thread as factually incorrect and why Joe altered the thread title in response.

I do support Shortens' NG and other tax policies but not this policy if someone's only source of retirement income is divvies and credits and less than $19k.

 

[rnr]

I do support Shortens' NG and other tax policies but not this policy if someone's only source of retirement income is divvies and credits and less than $19k.

Please correct me if I am wrong. My understanding from your statement is that you believe it is equitable to introduce a double taxation policy on the proviso it doesn't affect an individual with an income of $19,000 or less.

 

[PZ99]

Please correct me if I am wrong. My understanding from your statement is that you believe it is equitable to introduce a double taxation policy on the proviso it doesn't affect an individual with an income of $19,000 or less.

I don't have a problem with that. I didn't say it was equitable though - it's not.

What I do have a problem with is the tax rate being as high as 30% in the first place. Programs such as Neg Gearing and other welfare handouts are what's keeping us a high taxing country.

If the tax rate was lower like it is in most other countries threads like this wouldn't exist.

 

[rnr]

I don't have a problem with that. I didn't say it was equitable though - it's not.

What I do have a problem with is the tax rate being as high as 30% in the first place. Programs such as Neg Gearing and other welfare handouts are what's keeping us a high taxing country.

If the tax rate was lower like it is in most other countries threads like this wouldn't exist.

So the choices are:-

a) increase the tax rates overall - equitable, as all taxpayers will share the burden (and not be happy) even though, as you say, they are too high already,
b) resolve the problems relating to Negative Gearing and other welfare handouts that result in Australia being a high taxing country - equitable, perhaps to some degree although you can guarantee that certainly not all taxpayers or welfare recipients will be happy or
c) introduce a tax to solve the problem, which in your own words is inequitable and you don't have a problem with that.

 

[Smurf1976]

An interesting opinion piece which, on the surface at least, seems a reasonable idea.

https://www.abc.net.au/news/2019-03...ry-is-the-legacy-the-coalition-needs/10935062

 

[sptrawler]

How long has Combet been in that position?

Here is the article is was referring to:
https://www.smh.com.au/business/ban...million-bonus-allegation-20190315-p514mn.html

Here is another interesting article, where Greg gets a mention:

https://www.afr.com/news/economy/its-members-money-not-greg-combet-and-big-supers-20190304-h1bz6y

 

[sptrawler]

I've been holding ANZ bank shares since 2001. They are nothing like that chart either - but they pay all my bills and more. And they sure as hell return a lot more than 4.2% p/a.

And the GFC was a much harder axe to bear than the CGT / NGT / Franking policies will be.
If you look at the long term as that chart does it's not a reason to give up investing IMO.

Within ten years and another ten prime ministers the policies will all be rolled back anyway

If you bought ANZ in 2001, you will really have a CGT event, if you ever have to sell them.

 

[qldfrog]

You always have CGT if you hold a portfolio long term, if in a lic or eft the lic or eft will pay cgt when they rebalance, or if own directly you will buy sell to keep a match with the index
Badcock diseappear, healthcote get privatised etc etc
Cgt without inflation means it is not reasonable to invest long term in this country..already with the current discount you should buy and sell after a year,.if the discount reduces becomes even more critical

 

[Value Collector]

That doesn't mean a "business owner" pays 30% tax. Sole traders don't pay 30% tax.

I'm not quite sure where you're going with all this... my statement you quoted was that if I was investing a million dollars then I wouldn't worry about franking credits.
I wouldn't have to. Why would I? Would I? I wouldn't. That's because I expect my ROI to put me in a comfortable enough position to not worry about franking credits

In any case I haven't said in this thread that I support low income earners loosing their credits.

I was just pulling up the OP for spinning conspiracy theories and false logic. It's one of the reasons why someone else reported this thread as factually incorrect and why Joe altered the thread title in response.

I do support Shortens' NG and other tax policies but not this policy if someone's only source of retirement income is divvies and credits and less than $19k.

We are talking about people owning businesses through companies, eg shareholders.

You said you wouldn’t worry about franking credits if you were investing a 1,000,000 but the franking credits make a big difference to a $50k dividend

If you are earning $50k a year and paying 30%, while others earn the same amount and pay 20% that is unfair.

Or worse if you are earning $15k and paying 30% while your peers are getting tax free income

 

[sptrawler]

You always have CGT if you hold a portfolio long term, if in a lic or eft the lic or eft will pay cgt when they rebalance, or if own directly you will buy sell to keep a match with the index
Badcock diseappear, healthcote get privatised etc etc
Cgt without inflation means it is not reasonable to invest long term in this country..already with the current discount you should buy and sell after a year,.if the discount reduces becomes even more critical

What I was meaning frog, was that ANZ back in 2001 when PZ99 bought them were really cheap, if Labor increase the CGT to 75% and he has to sell them, he will be up for a LOT more tax.

 

[Value Collector]

I think the current model is pretty fair, I don’t mind paying 45% tax on my earnings over a certain amount, provided it’s not double taxation on top of the tax already paid at the company level, franking credits solve this problem perfectly.

I also don’t mind a low income earner paying less than 30% tax, and getting a refund of franking credits to make this happen, franking credits solve his problem perfectly.

If you have a problem with high net worth people getting tax free income because of super, then add a marginal rate to that above certain levels.

Banning franking credit refunds is silly, it just means certain asset classses will be tax more than others.

 

[Value Collector]

$70,000 in bank interest from a million dollars ? LOL

It’s not “bank” interest, but I am currently earning 9% on my rate setter account, and That would give you $90k on $1,000,000.

You would then be paying a lower tax rate on that interest, than a shareholder earning a 5% dividend, simply because the money is invested in a company.

In fact if you opened the exact same account in a company name you would pay my tax than if it’s in your own name, that’s just silly rules.

 

[Smurf1976]

I think the current model is pretty fair, I don’t mind paying 45% tax on my earnings over a certain amount, provided it’s not double taxation on top of the tax already paid at the company level, franking credits solve this problem perfectly.

I also don’t mind a low income earner paying less than 30% tax, and getting a refund of franking credits to make this happen, franking credits solve his problem perfectly.

If you have a problem with high net worth people getting tax free income because of super, then add a marginal rate to that above certain levels.

Political biases aside I really can't see anything even slightly unfair about this approach given it's the exact same approach which applies to all other income.

As you say, if there's an issue with high income earners and super then that's the bit to change.

 

[PZ99]

What I was meaning frog, was that ANZ back in 2001 when PZ99 bought them were really cheap, if Labor increase the CGT to 75% and he has to sell them, he will be up for a LOT more tax.

I've held them for so long now they're effectively a freehold because of the divvies.

They pay all my bills and leave me some beer money so will never be sold

 

[PZ99]

We are talking about people owning businesses through companies, eg shareholders.

You said you wouldn’t worry about franking credits if you were investing a 1,000,000 but the franking credits make a big difference to a $50k dividend

If you are earning $50k a year and paying 30%, while others earn the same amount and pay 20% that is unfair.

Or worse if you are earning $15k and paying 30% while your peers are getting tax free income

Sure, I agree with your last sentence.

But it would be nice to bring that 30% down to 20% - which would alleviate half the problems we're discussing here.

 

[PZ99]

So the choices are:-

a) increase the tax rates overall - equitable, as all taxpayers will share the burden (and not be happy) even though, as you say, they are too high already,
b) resolve the problems relating to Negative Gearing and other welfare handouts that result in Australia being a high taxing country - equitable, perhaps to some degree although you can guarantee that certainly not all taxpayers or welfare recipients will be happy or
c) introduce a tax to solve the problem, which in your own words is inequitable and you don't have a problem with that.

Option B first. Then option C wouldn't be so evil. Option A sounds like a Greens policy.

 

[sptrawler]

I've held them for so long now they're effectively a freehold because of the divvies.

They pay all my bills and leave me some beer money so will never be sold

That is the way I like to work with the backbone stocks, in my portfolio, it is a shame Shorten has to mess with it.
If I had known the franking credits were going to be changed, I would have kept my PPR, rather than downsizing and sticking the money in super.
The problem is three elections ago, Labor were going to hit Million dollar home owners with the asset test, then next election they were going to tax super earnings above $100k, now it is franking credits.
There is no way, I would believe anything that slimy sod ever said, I wouldn't vote for him, if he had a gun to my head.
He couldn't lie straight in bed. IMO
My rant for the week.