Maintain the current dividend imputation system

[Toyota Lexcen]

On 50K you have taxable income so it will be reduced by any franking credits

someone earning 10k cleaning a house, and gets 8k in dividends will loose the franking credits

oops, they rich cause they get 8k in dividends

HelloU your example is the one I am interested in understanding. Specifically the statement that a low income worker with some CBA shares yielding $600 a year rebate would not get a rebate under Labour.

Lets say for argument sake he/she is making $50k a year.

 

[sptrawler]

Yes, I agree with that, but overall superannuants (including me) are on a good deal tax wise.

Beats me why they decided to go after franking rebates instead of progressive taxes, maybe because it's something that very few people understand and they thought it would slip under the radar.

No they are taking them off SMSF, so the fund returns about 4-5%, they are still giving Industry funds all the franking credits, so they will be able to offer 7%.
The SMSF will have no option but to change over.
The problem with that is, I pay $850/pa, in accountant and auditing fees, the industry fund will charge somewhere between $5k -$10K.
The taxpayer is footing that bill, so in reality it is just about the Industry Funds getting further in the trough.
I would rather spend it, than get blackmailed by the Government, f&%$K em.
Appologies for the language.

 

[basilio]

again, what peeps should know is that low income peeps with franked dividends will have money taken out of their pockets whilst old mate up the road on $400K pa does NOT LOSE ONE CENT.

i do think that low income peeps deserve to lose one cent from their pockets.

a policy that takes money from the pockets of low income peeps, and does not touch high income workers, is BAD POLICY for australia.

(for basilio, a person on $50K paye pays approx $8800 in tax (ignore offsets) .......... not sure if that helps anyone ....people that got a credit refund of $600 will lose that $600 refund under labor, if you got a credit refund of $100, you will lose that $100 refund, if you got a credit refund of $900, you will lose that $900 refund - the pattern remains the same, if you used to get a franking credit refund then labor will keep that money and NOT REFUND it - whatever amount it is. that is what the policy is designed to do. If you cannot work out the figure for a particular person then give me the numbers for that person and i can calculate the figures for you)

This doesn't make sense... Full stop.. And it is not true.
A PAYE worker on $50k with some dividends from shares will have no change whatsover with Labours proposed policy.

At this point he/she is not getting any direct refund of tax credits because they are are used against his PAYE earnings. If Labour passes this policy he/she will still use the tax credits against his income.
That is it.
_________________________________

The argument about the loss of the refund of tax credits applies to people who have arranged their affairs so they have little taxable income against which to use the tax credits . This is usually very wealthy people (or their partners or children) who have managed to construct a tax return with enough deductions so their nominal taxable income is low but they get $20,30,100K in fully franked dividends from investment portfolios worth about 20 times these dividends.

These are not low income toilet cleaners working three days a week.

 

[HelloU]

yep, aussie tax office says low income is up to $66K taxable - not sure if that helps this though .....

it is correct that low income earner that previously got a credit refund at tax time will lose that refund under the labor party.

low income peeps that got a $200 credit refund will get zero under labor
low income peeps that got a $600 credit refund will get zero under labor
low income peeps that got a $900 credit refund will get zero under labor

whilst high income workers get ALL of their credits ............seems labor does not care about low income workers in australia.

 

[PZ99]

@basilio it's not about the low income toilet cleaners, or those who pretend to be - it's about the low income self funded retirees whose only source of income is from the dividends.

If their total yearly income is under the tax free threshold they potentially lose around $4000 a year from lost franking credits.

They then have to decide whether they go back to work (not likely given the employers' grudge against older people) or go onto welfare - which partially mitigates the budget savings.

This is the part of the policy opposed by most of the parliament - including the Greens, which is why I maintain the view that it won't succeed..

 

[Toyota Lexcen]

This doesn't make sense... Full stop.. And it is not true.
A PAYE worker on $50k with some dividends from shares will have no change whatsover with Labours proposed policy.

At this point he/she is not getting any direct refund of tax credits because they are are used against his PAYE earnings. If Labour passes this policy he/she will still use the tax credits against his income.
That is it.
_________________________________

The argument about the loss of the refund of tax credits applies to people who have arranged their affairs so they have little taxable income against which to use the tax credits . This is usually very wealthy people (or their partners or children) who have managed to construct a tax return with enough deductions so their nominal taxable income is low but they get $20,30,100K in fully franked dividends from investment portfolios worth about 20 times these dividends.

These are not low income toilet cleaners working three days a week.

once you get over 18K in dividends you are taxed, its income

 

[sptrawler]

@basilio it's not about the low income toilet cleaners, or those who pretend to be - it's about the low income self funded retirees whose only source of income is from the dividends.

If their total yearly income is under the tax free threshold they potentially lose around $4000 a year from lost franking credits.

They then have to decide whether they go back to work (not likely given the employers' grudge against older people) or go onto welfare - which partially mitigates the budget savings.

This is the part of the policy opposed by most of the parliament - including the Greens, which is why I maintain the view that it won't succeed..

Like I said to Rumpy, it is a ham fisted way, to get SMSF's into Union Industry Funds.
I hope your right PZ99, because I hate spending money, just for the sake of it.
I sold a really nice house, in a really nice position on the river, to become self funded.
Now I wish I hadn't bothered, and just stayed in the house,with a Government pension.
If I had known that super, was going to be screwed around with so much, I would have organised my affairs differently.
God knows how bad it will be in 20 years time.

 

[basilio]

once you get over 18K in dividends you are taxed, its income

The important point TL was that taxable income is kept low. The strategy currently used by some retirees is receiving dividend income through super funds which is not included as part of their taxable income. So they pay no taxes on $50,60,100k of dividend income.

Then because they they have such a low nominal income they have been getting the imputation credits as well. This will be usually worth an extra 30%.

I can see the point about a small group of retirees living off relatively modest investments being unfairly hurt. However the overwhelming fact is these people represent only a small part of the affected group. I'll repost an analysis soon.

As you point out the argument that hardworking toilet cleaners on $50k with investments in the Comm Bank will lose tax credits isn't accurate.

 

[HelloU]

@basilio it's not about the low income toilet cleaners, or those who pretend to be - it's about the low income self funded retirees whose only source of income is from the dividends.

If their total yearly income is under the tax free threshold they potentially lose around $4000 a year from lost franking credits.

They then have to decide whether they go back to work (not likely given the employers' grudge against older people) or go onto welfare - which partially mitigates the budget savings.

This is the part of the policy opposed by most of the parliament - including the Greens, which is why I maintain the view that it won't succeed..

just so i can follow ...can i assume when talking tax thresholds u r talking about income outside the super system? ( by someone over 60)

 

[basilio]

Will Labor's dividend imputation policy overwhelmingly affect the low paid?

....
What the experts say
Melbourne University tax law expert Professor Miranda Stewart said the use of taxable income to assess the impact of Labor's dividend imputation policy "does not tell us very much".

"In fact it is precisely because taxable income is low that a refund is achieved," Professor Stewart said.

"Payouts from superannuation whether pensions or lump sums are exempt. Many senior Australians also benefit from the senior Australians and pensioners tax offset which effectively raises the tax free threshold to more than $50,000 for those who have relatively low taxable earnings. Again this creates the conditions for the tax refund from the franking credit."

Ms Wood, from the Grattan Institute, said most of the people affected were self-funded retirees.

"And the reason they are affected is because they get refunds and the reason they get refunds is because they have low taxable incomes," Ms Wood said.

"The reason they have low taxable incomes is because the income generated by self-managed super funds up to balances of $1.6 million is tax free. So their taxable income could be low but their actual income is often reasonably healthy, but they are still getting access to imputation credits.

"Taxable income is a very poor estimate of means when you are talking about people in retirement."

Kathrin Bain, from the School of Taxation and Business Law at UNSW Sydney, said as a general rule most of those affected by Labor's policy had marginal tax rates less than the company tax rate.

"To be affected by this policy you have to have a marginal tax rate that is lower than the company tax rate," Ms Bain said.

https://www.abc.net.au/news/2019-01-30/fact-check-labors-dividend-imputation-policy/10626204

 

[HelloU]

many issues getting confused here ........
is the argument here now that the annual mandated super drawdown should be included in the tax return of individuals? (so we can get a "clearer picture" of income)

or is the problem that $100K can be "earned" inside a super fund each year?

 

[HelloU]

"Kathrin Bain, from the School of Taxation and Business Law at UNSW Sydney, said as a general rule most of those affected by Labor's policy had marginal tax rates less than the company tax rate".

that is the truth ........... for whatever reason anyone with a tax rate below 30% (forget 28.5% etc) is going to have money taken out of their pocket.(except if you are on welfare u get to keep the money)

Labor is ONLY taking money away from peeps on tax rates lower than 30% .......... that is not a great policy for a country.

 

[HelloU]

"Kathrin Bain, from the School of Taxation and Business Law at UNSW Sydney, said as a general rule most of those affected by Labor's policy had marginal tax rates less than the company tax rate".

that is the truth ........... for whatever reason anyone with a tax rate below 30% (forget 28.5% etc) is going to have money taken out of their pocket.(except if you are on welfare u get to keep the money)

Labor is ONLY taking money away from peeps on tax rates lower than 30% .......... that is not a great policy for a country.

soz ...not quite true .... by "anyone" i mean "anyone that is not on welfare and is trying to get above the mire by investing in franked shares".

 

[Toyota Lexcen]

the discussion about super is also confusing the issue. They are rules of "superannuation", I believe that over 50% of people who get a cash refund are outside of superannuation.

The important point TL was that taxable income is kept low. The strategy currently used by some retirees is receiving dividend income through super funds which is not included as part of their taxable income. So they pay no taxes on $50,60,100k of dividend income.

Then because they they have such a low nominal income they have been getting the imputation credits as well. This will be usually worth an extra 30%.

I can see the point about a small group of retirees living off relatively modest investments being unfairly hurt. However the overwhelming fact is these people represent only a small part of the affected group. I'll repost an analysis soon.

As you point out the argument that hardworking toilet cleaners on $50k with investments in the Comm Bank will lose tax credits isn't accurate.

 

[willy1111]

I sold a really nice house, in a really nice position on the river, to become self funded.
Now I wish I hadn't bothered, and just stayed in the house,with a Government pension.
If I had known that super, was going to be screwed around with so much, I would have organised my affairs differently.

Pull your money out of Super, buy the another nice house on the river and go on the pension

And then they will bring the home into the asset test

 

[SirRumpole]

Now I wish I hadn't bothered, and just stayed in the house,with a Government pension.

Not many government pensioners can afford to take overseas holidays.

 

[PZ99]

just so i can follow ...can i assume when talking tax thresholds u r talking about income outside the super system? ( by someone over 60)

Yes, but not necessarily someone over 60. I'm looking at someone who may have been retrenched - saved a bit of money - but can only generate 18k p/a or less from it. And probably unfit for work.

When the 7:30 report did a thing on the Labor policy there was a protester in the above position.

Super is something I haven't really looked at yet.

 

[HelloU]

Yes, but not necessarily someone over 60. I'm looking at someone who may have been retrenched - saved a bit of money - but can only generate 18k p/a or less from it. And probably unfit for work.

When the 7:30 report did a thing on the Labor policy there was a protester in the above position.

Super is something I haven't really looked at yet.

thx
many circumstances involved so a lot of terms get used loosely (the word pensioner can mean different things to different peeps, or the word income etc ....) a lot of confusion occurs.

 

[HelloU]

i care little one way or the other .... i just want a simple system ....here is the current one


most peeps who pay me put the money into my westpac account ...........but some peeps that pay me put the money into another bank account (that i cannot access until the end of the tax year).

it does not matter though cos all of that money (both bank account credits) get combined together at tax time to form a thing called my gross income (the govt calls it my assessable income).

i do some accounting stuff and subtract deductions and then it becomes what the government calls my net or taxable income.

they then calculate the tax i owe them from this taxable income figure.

the income $$ that went into my westpac account can be used by me as cash flow through the year to buy groceries and petrol and pay bills. the $$ income that went into that other bank account cannot be touched by me until after the tax year when i do my tax return - but it was still income paid to me and was included in my taxable income - i mean it was included in the money that i got "into my pocket" as income for the year even though i could not access it at the time.

that is what currently happens ...............

if that second bank account runs a debit at the end of the year then i have to add money to square it up and zero the balance at tax time.

if it has excess money in it at the end of the year .....i get to take that money out and use it as cash flow.

the current/future question is what should happen to any remaining credit bank balance that has already been "assessed" as having been put into my pocket as income earlier in the year?

should it be allowed to go into my pocket or be confiscated by the government?

 

[Smurf1976]

15% tax on super contributions, tax free in pension stage, the hoohah over franking rebates really smacks of children having a lolly taken away from them before they get fed their dinner.

Super isn't the biggest issue since there seem to be workarounds to that one via industry funds and super is, of course, a tax favoured environment as a concept in the first place.

It's investments outside of super which are more of a concern. Anyone who plans to retire prior to the age arbitrarily set by government or who simply saved and invested for the proverbial rainy day seems to be a target the moment their incomes drops - and protecting themselves in that scenario is the very reason they invested in the first place.

There's an awful lot of people out there who involuntarily retired in their 50's before they could access super or the pension. Plenty of blue collar workers end up in that situation but it affects white collar too to some extent. The smart ones thought they were doing the sensible thing by investing additional funds outside super to cover themselves if that day comes.

Given that the stereotypical person in that situation would be a tradie or manual worker, I'd have thought Labor would be on their side. Seems not.