Maintain the current dividend imputation system

[HelloAgain]

What do people think will happen in response to the proposal? My first thought is that companies holding excess franking credits will return them to shareholders via buybacks or bumper dividends. Companies and individuals will be more likely to invest off shore possibly leading to a shortage of capital for investment in Australia, higher interest rates, increased unemployment and recession. Residential property will also become a more attractive investment even with the proposed CGT discount increase.

 

[willy1111]

Thanks for that clear explanation willy. So it seams to me that those people who earn $37K or less are most affected. In other words those who earn the least are most affected, so the Labor party therefore doesn't give a stuff about people who have a low income. I won't be voting for this.

As I understand it, Yes if not in receipt of a Commonwealth pension or smsf pension prior to 19 March 2018.

Also smsfs are impacted in a big way, particularly those in pension mode.

If smsfs were there target, which they mention in their spiel about a smsf receiving a $2.5m tax refund, why not change the way super is taxed?

Maybe there have been too many changes to super over the years they thought they'd try to sell it as a rich vs working class thing.

What he fails to realise is that it is the working class that have worked hard to build a modest portfolio of shares to be self funded that will be most impacted.

I mean who do you think will feel it more, Mary who's income goes from $50k to $35k or Mr Rich whos smsf receives $12M instead of $14.5M?

 

[willy1111]

What do people think will happen in response to the proposal? My first thought is that companies holding excess franking credits will return them to shareholders via buybacks or bumper dividends. Companies and individuals will be more likely to invest off shore possibly leading to a shortage of capital for investment in Australia, higher interest rates, increased unemployment and recession. Residential property will also become a more attractive investment even with the proposed CGT discount increase.

It won't change the way I invest.

However I suspect a lot that are on the cusp of receiving an age pension will spend up on holidays (so travel stocks might do well) maintenance/upgrades around the home to become eligible for a pension so they can get the franking credits.

Otherwise over time people may just sell down capital to replace the income missed by franking credit refunds if they need it. This will result in eating their assets which is likely to mean their assets will decrease over time and eventually they will become eligible for the pension.

 

[ijrob6]

The original announcement didn't include pensioners...but after a massive backlash, Bill made a further announcement that pensioners and those in receipt of a smsf pension prior to 19 March 2018 would still be entitled to the refund.

Also I think maybe union/industry funds are unaffected?

If labour were to get in, it is likely there may be further changes to their proposal, and they still have to get it through.

I am still uncertain whether SMSF pensioners (NOT age pensioners who receive another pension from a SMSF) will be exempted if already in pension mode by 19 March. It appears not if the following is a correct interpretation of Labor policy.

From a March 27 2018 article by Luke, SMSF Media Pty Ltd 2018.

“SMSF Association says Labor’s policy “still falling short”

The SMSF Association says the changed policy is a step in the right direction but still unfairly disadvantages over one million people, including many SMSF members.

SMSF Association CEO John Maroney said that while it was right that Age Pensioners be exempted, the Association still has “serious reservations” about the effectiveness and fairness of Labor’s policy.

“The amended policy excludes similar protection to self-funded retirees, many of whom draw their retirement income from retirement savings built over the lifetime in an SMSF to avoid relying on government support,” Maroney said.

“The refunding of excess company tax paid via refundable franking credits has been a long-standing feature of superannuation that SMSF members have built their retirement strategies around.”

“Under Labor’s proposal, the only SMSFs exempt are those that currently have at least one member receiving the Age Pension. And in the future, there will be no protection for SMSF retirees who may need part government support to supplement their superannuation income, creating an unfair, two-tiered and complex treatment of SMSF members who access the Age Pension in retirement.”

Maroney said the Pensioner Guarantee exacerbates the effect of Labor’s policy on SMSF members, potentially leaving them worse off under the changes than people who have less savings, but receive refundable franking credits and a part pension.

The SMSF Association is urging the ALP to reconsider the entire policy, because of its “deleterious effects” on future retirement incomes.

 

[willy1111]

I am still uncertain whether SMSF pensioners (NOT age pensioners who receive another pension from a SMSF) will be exempted if already in pension mode by 19 March. It appears not if the following is a correct interpretation of Labor policy.

From a March 27 2018 article by Luke, SMSF Media Pty Ltd 2018.

“SMSF Association says Labor’s policy “still falling short”

The SMSF Association says the changed policy is a step in the right direction but still unfairly disadvantages over one million people, including many SMSF members.

SMSF Association CEO John Maroney said that while it was right that Age Pensioners be exempted, the Association still has “serious reservations” about the effectiveness and fairness of Labor’s policy.

“The amended policy excludes similar protection to self-funded retirees, many of whom draw their retirement income from retirement savings built over the lifetime in an SMSF to avoid relying on government support,” Maroney said.

“The refunding of excess company tax paid via refundable franking credits has been a long-standing feature of superannuation that SMSF members have built their retirement strategies around.”

“Under Labor’s proposal, the only SMSFs exempt are those that currently have at least one member receiving the Age Pension. And in the future, there will be no protection for SMSF retirees who may need part government support to supplement their superannuation income, creating an unfair, two-tiered and complex treatment of SMSF members who access the Age Pension in retirement.”

Maroney said the Pensioner Guarantee exacerbates the effect of Labor’s policy on SMSF members, potentially leaving them worse off under the changes than people who have less savings, but receive refundable franking credits and a part pension.

The SMSF Association is urging the ALP to reconsider the entire policy, because of its “deleterious effects” on future retirement incomes.

Yes I think you are right - it has to be a pension from the government, and it is 28 March 2018 (my mistake) to be still eligible for franking credits.

 

[sptrawler]

Assuming an SMSF is in accumulation mode where 15% tax on income is applied. If it received a $12M fully franked dividend with franking credit of $5.142M - gross up income would be $17.142M. 15% tax on $17.142M would mean a $2,571M tax bill - applying the franking credit of $5,142M would result in a tax refund of $2.571M.

To receive a fully franked dividend of $12M at 5% yield would mean the fund would have to be worth around $240M.

Not to many funds would be in that bracket.

BS there must be thousands of funds in that scenario.

 

[sptrawler]

Yes I think you are right - it has to be a pension from the government, and it is 28 March 2018 (my mistake) to be still eligible for franking credits.

So does that mean a pensioner couple, with a SMSF of $900,000, worth of shares, get the franking credit?

 

[sptrawler]

I mean who do you think will feel it more, Mary who's income goes from $50k to $35k or Mr Rich whos smsf receives $12M instead of $14.5M?

The first thing you should check, is how many people have a SMSF anywhere near $12m.
If I was that rich the last thing I would be doing, is putting it away where the Government can tell me how to spend it.
FFS how stupid do you think people with $12m are?
The only people that Labor are going to hit, are hard working Australian's, who have either worked hard to save or worked hard to build a small business.
As usual the plebs with the pitchforks, follow the rant, and want to hunt down the non conforming. lol
Nothing much changes through the centuries.

 

[Bill M]

Yes I think you are right - it has to be a pension from the government, and it is 28 March 2018 (my mistake) to be still eligible for franking credits.

I am not at pension age yet and I do not receive any pension. Does that mean that when I do get on the pension (after 28 March 2018) I will not receive refunds of imputation credits? So are you saying some Aussies will get it and some won't jut because of a cut off date? If that is the case then it is one big %$#& up and it isn't fair.

 

[Junior]

The first thing you should check, is how many people have a SMSF anywhere near $12m.

Not many, and with the $1.6mill cap the number of big SMSF balances will only diminish over time.

Furthermore, these funds have already had their big tax refunds slashed with introduction of the $1.6mill cap.

 

[sptrawler]

I am not at pension age yet and I do not receive any pension. Does that mean that when I do get on the pension (after 28 March 2018) I will not receive refunds of imputation credits? So are you saying some Aussies will get it and some won't jut because of a cut off date? If that is the case then it is one big %$#& up and it isn't fair.

I'm in the same situation as you, not at age pension age, but paying your way.

From my understanding Bill, if you have a pension from a SMSF, you don't get the franking credits. People on a Government age pension, who have shares, will still recieve the franking credits, cheap prescriptions,rates, licenses,utilities etc.
Union run Industry Funds, will still get the franking credits, as they are supposedly a not for profit organisation.
It is all about trying to force people out of SMSF's into Industry funds, brought about by the unions putting pressure on silly Billy. like I've said on numerous occassions, the only losers with Labor, are hard working people, trying to get ahead.
It will be interesting to see the figures on super, for the 2018/19 year, they will have crashed.
Also the saving from the franking credit, that silly Billy was saying is BS also, they were worked out pre the $1.6M cap. The savings will minimal, wait untill the real figures come.

 

[SirRumpole]

the only losers with Labor, are hard working people, trying to get ahead.

I'll remind you again of the party that introduced dividend imputation in the first place.

https://en.wikipedia.org/wiki/Dividend_imputation

 

[sptrawler]

I'll remind you again of the party that introduced dividend imputation in the first place.

https://en.wikipedia.org/wiki/Dividend_imputation

What has that got to do with it?
Remove them from everyone including the Industry funds, or else it is just a witch hunt.

 

[SirRumpole]

What has that got to do with it?
Remove them from everyone including the Industry funds, or else it is just a witch hunt.

Those refunds are basically middle class welfare granted by the great god Howard.

Super payments currently are not taxed at all and contributions only taxed at 15% so don't tell me super recipients (of whom I am one), are hard done by.

 

[sptrawler]

Those refunds are basically middle class welfare granted by the great god Howard.

Super payments currently are not taxed at all and contributions only taxed at 15% so don't tell me super recipients (of whom I am one), are hard done by.

What has that got to do with anything?
I said make it universal, so no superfunds get the franking.

 

[SirRumpole]

What has that got to do with anything?
I said make it universal, so no superfunds get the franking.

I'll pass on that thought to Bill.

 

[ijrob6]

Perhaps some clarity of terms might help. "Pensioner" can be an aged pensioner (government), a superannuation pensioner from a managed fund or a SMSF pensioner. No doubt there are other types but for this discussion I think these will do.

As I understand the current proposed Labor policy it will only affect the SMF pensioner who is not in receipt of a full or part government pension.

Sprawler - no SMSF couple with a $900,000 share portfolio can receive any government pension, full or part - the cut off for assets is $816,000 as of 1/1/17. If their SMSF currently pays them a pension then yes, at present, their fund receives the dividend imputations. If the Labor policy is introduced then no - no imputation. Hence a reduction of 30% of the fund income (assuming the majority of income is from dividends).

Bill M - that is exactly what the situation will be.

 

[sptrawler]

I'll pass on that thought to Bill.

Good to see you up to speed.

All it is going to do is give middle class welfare to those in Industry funds, but I guess that's o.k, if Bill's on the board.

 

[sptrawler]

Perhaps some clarity of terms might help. "Pensioner" can be an aged pensioner (government), a superannuation pensioner from a managed fund or a SMSF pensioner. No doubt there are other types but for this discussion I think these will do.

As I understand the current proposed Labor policy it will only affect the SMF pensioner who is not in receipt of a full or part government pension.

Sprawler - no SMSF couple with a $900,000 share portfolio can receive any government pension, full or part - the cut off for assets is $816,000 as of 1/1/17. If their SMSF currently pays them a pension then yes, at present, their fund receives the dividend imputations. If the Labor policy is introduced then no - no imputation. Hence a reduction of 30% of the fund income (assuming the majority of income is from dividends).

Bill M - that is exactly what the situation will be.

Sorry, isn't that what I said?

 

[SirRumpole]

Good to see you up to speed.

All it is going to do is give middle class welfare to those in Industry funds, but I guess that's o.k, if Bill's on the board.

Are you up to speed on the Royal Commission ?

Industry funds sailed through the examination by the RC unlike the ratail (sorry retail) funds.

http://www.abc.net.au/news/2018-08-...ission-roasts-nab-retail-super-funds/10107012

So maybe it's a good thing if people are encourage to switch to industry funds.