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Maintain the current dividend imputation system

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Overall the abuse of the refund of excess imputation credits is a $5 Billion a year rort used by creative accountants to ensure their very wealthy clients can become even wealthier.

On the way there will be circumstances where a small number of people who don't fall into that category lose monies as well. I don't believe we should allow the loss of $5B a year to the tax revenues to be overridden by the far smaller amounts incurred elsewhere. And it think it is disingenuous of people to point at the real (or mythical) hard done "apple pie Mom" as the sufferer of this change and refuse to recognise the obscenely rich clients who represent the overwhelming problem.

What can happen is
1) Developing particular exemptions
2) Looking for alternative treatments of investments and income.

Knobby got it in one
BHP pay 30% tax.
Keating set it up so the taxpayers don't pay 40% tax and top of the 30% tax (double taxation).
In 2000 Howard changed it so if you pay no tax you get the money from BHP and the government gets no money. This has of course been abused by some extremely wealthy people and resulted in billions of dollars being removed from the tax take. Obviously long term untenable.
 
Toyota Lexcen said:
That article doesn't really prove/disprove anything.

Just various opinions on the situation.

Labor getting concerned though.
Click to expand...

Actually I suggest it did prove things. It was a fact checking analysis undertaken to explore the concerns of people the the proposed abolition refunding imputation credit would hurt low income people.

So in a very detailed paper they examined how the people most affected did in fact have low taxable incomes - but that was the whole point of the exercise. You had to restructure your income sources to ensure your final taxable income was low enough to enable all those refund credits to become activated.
 
As others have mentioned here, progressive tax rates on pensions, and/or lowering the Transfer Balance Cap would be more straightforward & fair, compared to fiddling with franking credits, which will only generate new loopholes. That way modest super balances and lower income earners can still claim their refunds, and the Government can still re-claim a significant chunk of revenue by shutting down those who are claiming large refunds.

There are many retirees out there, with relatively modest savings who rely on FC tax refunds as part of their retirement income. It's unfair hitting these retirees, who have already copped a pay-cut when the Asset Test was re-jigged a couple of years ago.

Once you are fully retired, your ability to change your strategy or find more income is very difficult or impossible. Bringing in new rules without grandfathering existing arrangements is unfair on those already retired, who planned their affairs during pre-retirement.
 
if the bhp profit is already "fully taxed" at 30%, and then distributed after that tax has been paid, why is there any more tax of any sort owing on that distribution?

when my grandma gives me after tax money from her purse i do not pay any tax on it
 
Do you ask the government to give you the tax she paid though?
 
if bhp put 70c of their after tax profit into my pocket then fine, i get 70c.

but if the government then want to get involved and turn around and say that i "actually" got $1 in my pocket, then also fine, i will pay tax on the $1 at my tax rate (noting the government already has 30c of that money).

but if my tax rate is zero, and the government says i got $1, then why should i not get the $1 in my pocket. (explain why if the government says i have $1 in my pocket - like ato and centrelink say that - why i only have 70c in my pocket)
 
it fails the logic test if the government (both ATO and Centrelink) say someone has $1 in their pocket, if they only have 70c in their pocket.
 
Well said Junior.
The problem is you are dealing with a majority of people, who are working and thinking smugly about there 'safe' position.
The reality hits all sooner or later, that is why when Labor get in, it will be a short period. IMO
Time will tell.
 

What about a requirement to include all income in calculation of rebates rather than just taxable ?
 

That logic sounds awfully similar to the one that says it doesn't matter if we kill a few thousand civilians so long as we get the one or two terrorists we're after.

Or that we should abolish Newstart and the Disability Support Pension altogether because it's no secret that quite a few people have rorted them. That some people genuinely need assistance doesn't justify having a system which can be rorted so it's easier to get rid of it altogether.

Or that no middle aged white man should be allowed to spend time alone with any young girl, including his own daughter, because a few have done really bad things. That some men might be good parents, or in some cases the mother isn't around or even alive, doesn't justify the risk that some will do bad things.

Or that no person of whatever race should be allowed in the CBD because there's been a few causing trouble lately so it's easiest to just keep them all out. We don't know which are which, so the only option is just keep them all out based on visual appearance.

Or we should ban the sale or possession of matches and lighters because of arsonists. Never mind people who have BBQ's or who burn wood for heating, who use blowtorches etc for legitimate purposes, who like using candles at home or in churches or who legally smoke cigarettes or cigars. None of that justifies the risk of arson so we'll ban matches and lighters.

We could reduce the road toll to zero simply by banning the use of any vehicle with wheels on public roads. It' only a minor restriction, any use not involving wheels will still be allowed, and it's wrong to use arguments about the utility of cars or the need to transport food to shops as justification for something that has killed many thousands of people in this country alone.

All are examples where some people do the wrong thing but where implementing a blanket ban would be considered totally unacceptable due to the inconvenience, discrimination and in some cases devastating consequences for the innocent persons who become collateral damage.

Likewise I see no justification for applying a 30% rate of tax to someone with a genuine, real, honest income of $25K a year just because doing so is the simplest an easiest way to stop others rorting the system.

Yes there no doubt are people rorting the system and yes that should be stopped. But the end doesn't justify the means when innocent people become collateral damage. Rather, the rational solution is to use the same approach we use with everything else. Outlaw the practices being used to rort the system and enforce the law.

Likewise outlawing the many other tax avoidance schemes should also be dealt with if there's a desire to put a stop to tax avoidance and raise more revenue.

My point is more about fairness of process than any specific $ amount.
 
As an expansion on the general topic, there's an entire industry of people I'll loosely refer to as "tax advisers" which exists for one purpose only and that is to assist clients to find loopholes in taxation laws. There's far more loopholes than just those which involve franked dividends.

Moving to a simple, streamlined tax system would get rid of all such loopholes. If you don't have complexity then you don't have cracks in the system to be exploited. That's much like saying the one sure way to not have termites is to not have any wood.

What do I mean by a streamlined system?

1. Income tax scales apply to all income less allowable deductions.

2. The only allowable deductions are costs required in order to earn that income plus donations to legitimate and approved charities.

3. A flat rate of GST on all goods and services with no exceptions other than medical items.

4. Review welfare rates of payment in view of the above.

5. Retain excise on "harmful" products (tobacco and alcohol). It's a complexity and in that sense is undesirable but it's perhaps a justifiable one given the non-essential and clearly harmful nature of the products it applies to.

6. Abolish fuel excise in the interests of administrative simplicity and replace it with a broad based carbon tax at a flat rate per tonne of CO2 emitted from any fossil fuel not just petrol or diesel. This avoids the complexity of different rates of tax and various rebate schemes etc whilst implementing a uniform tax on emissions for environmental reasons (noting that Australia is obligated to reduce such emissions as per international agreements). At present about two thirds of emissions are untaxed.

That gets rid of everything about trusts, voluntary super contributions, salary packaging, capital gains discounts, arguments about imputation credits, fuel rebates and indeed the entire tax "industry" in one fell swoop.

This would also facilitate a considerable lowering of income tax rates due to the greater volume of income actually being taxed. Eliminate every single loophole, capture all the income and tax it, and then you don't need a particularly high rate.

The reason it won't happen is, of course, that it gets rid of the entire tax avoidance industry.
 
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sptrawler said:
Absolutely, but tax by volume not by profits, it has been shown on many occassions to be easily by passed.
Click to expand...
Yes - the design of taxes needs to be such that there's no easy way around the intent of the law.

In the specific case of gas there would be some logic in an exemption for volumes sold to Australian consumers such that the resource tax would be one on extraction for export in practice.

Rationale for that is that there's a broader benefit in supplying gas to Australian homes and industry whereas with exports the royalties basically are the only benefit of the exercise.

Just a thought.
 

Just apply an export tax on gas in that case.
 
The other benefit of taxing by volume is, if it isn't viable, don't dig it up.

If all you are going to do is give it away, leave it in the ground, somewhat like nickel it went down to non viable prices, the mines closed.
Now the price is rising, the mines are looking at re opening.

To use the excuse that it will cost jobs, in order to keep mines open, is illogical.
Digging the resource up to give it away, will lead to job loses, when the resource is depleted and you have nothing to show for it.
It is as though we are the World's "loser", we have to rob each other, in order to allow overseas companies to clean us out.
Meanwhile the politicians, convince us that it is good for us, weird $hit. IMO

When we are one of the richest resource Countries in the World, with one of the smallest populations, and we can't afford welfare is crazy.
We are doing something very wrong. IMO
 
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