Shortens Tax Plan

So Bill Shorten proposes to strip franking credits of their ability to be refundable. Yet another ALP proposal that is being labelled as misuse by wealthly self funded retirees - a loophole he calls it.

Well Shorten what you havent explained is this proposal will harms ALL superannuation members incl union workers. It will impose a major tax shift on every worker in the country...not just so called wealthy retirees.

All super funds pay a rate of 15% tax and lower for pension members aged 60+ (0%). In its simplest for a 20 year old worker who receives contributions has that money invested. And much of it is invested in the share market. And often into companies that pay dividends or franked distributions...Typically 30-70% of member balances. The member pays 15% tax on the investment earnings and gets a credit for the 30% company tax already paid. So for each $1,000 of income earned by the member a credit of $214 occurs. This reflects in a earning rate higher than say interest rates.

Well thats going to be cut so EVERY super member will pay hundreds or even thousands of hidden tax dollars. Earning rates will fall. And by a significant amount. So super wont be so super. Future balances will be affected. More pensions may be the result.

ALP was for the workers ?? Doesnt seem so.
A $6billion dollar tax grab. Funded by ordinary unionists. Oh wont they love that

Its going to drive many super members to consider other options. Share values have to be impacted when the major super funds dump their shares knowing that the grossed up benefit is gone. They may as well invest direct in NZ, USA and even China now. There goes our equity markets !!

All that on top of the promise to kill off some negative gearing.

 

Don't forget that companies may need to offer two or more classes of shares ie. Franked, unfranked & partially franked so investors may need to choose carefully to maximise their income VN minimising tax at different points in time.

 

They are; just the ones who don't earn enough to pay any tax....everyone else is just too rich and needs to be taken down a peg or three.

 

Here is link to article.

I doubt labour will be able to get such a change passed through parliament.

Worst case scenario even if they do it's still not the end of the world. Look at US where dividend income is taxed at 15% on top of the tax already paid by the company. What do the companies do? They do share buybacks and return capital to shareholders in form of capital growth. Australian market will gradually shift from high yield to low yield high capital growth market.

Cheers,
Oracle.

 

It seems they are trying to tax the lower income earners instead of the higher.

 

And Labor are going to halve the CGT discount from 50% to 25%. Capital gains not looking as attractive either particularly outside Super. Bet CGT in Super will also be on their future hit list.

 

Don't forget that the franking credits also help to cover the tax paid on contributions, so not necessarily lost.

I understand the effect on lower income earners but to be honest, the number of clients we have with multi million dollar super funds getting $100' of thousands of dollars in franking credit refunds does completely go against the reason why franking was introduced.

At the extreme level, if BHP was entirely owned by super funds in pension phase (not considering the $1.6M balance changes), then they would effectively pay no company tax as it would all get refunded to the shareholders.

 

Cmon Paul. It's shorten. Did you expect anything else other than dribble and useless policies to come out of his mouth.

 

The bigger the gap between the rich and the poor, the easier it will be for changes like this to pass.

There's a huge part of the population (syd/melb) who have a household income round 100k who will either have to fork out well over 800k for a family house/townhouse or just rent forever.

If you're part of the the voting population living with this conundrum then shorten's plans start sounding pretty good.

The bigger the wealth gap, the more likely shorten will win the next election.

 

sigh ALP,

would like to see they come up with some positive plan to grow the economy? rather than taking the money from one section to the other, the overall wealth is not growing ( maybe declining)

 

It'll be interesting to see how this is sold to the masses by Shorten today. So much care for less well-off .

 

Exactly, and really disappointing from the ALP once again. Highly likely to be in government very soon. Hopefully this type of policy wouldn’t make it through the Senate but with the Greens possibly holding the deciding vote it could happen.

It would be good if all parties just left investors alone and focused on policies which encourage investment and new businesses.

 

can't agree more

 

Companies cant issue franked divs to one share class and unfranked to another. Some companies partly frank divs as they havent paid tax on all their profit. A good example may be Qantas. It has accum tax losses to offset current profits.

 

They will if they win Govt and the coalition get smacked. The anti Lib vote would repeat in the senate shifting power. They would likely have a majority in both houses, likely without needing cross bench support.

 

Investing in own name. What about selling shares for capital gain to offset against excess franking credits from franked dividends that would otherwise be lost. Then buy another share effectively resetting the cost base? @Paul@PFI?

 

Broader than that. They want to tax everyone. Companies, trusts, retirees, even low paid workers (but their mates in the unions will start a wage campaign so that will be funded by the bosses....The old ALP will be back an so will inflation.

Only ones they havent laid the boots totally into are the sick. For that he wants them to feel hope in the Medicare system

 

I'm calling it a tax on super. Lib's will bring back Abbott to hammer ALP with some three word slogans.

 

On a specific share investor level there are strategies. But its not that simple. Most shares produce income. They propose to cut the tax credit on the income.

Most people cant and wont engineer to address the issue. Your super for example.

I just completed a SMSF and members tax returns. As I explained to them the Shorten plan meant $30K more tax in their example.

His idea just forces people to rip their super out and hide the cash under the bed and then claim a Centrelink aged pension. A deferred problem for the budget of his making.

 

Wouldn't the easy option be the vehicles to alter their distributions to be gross, instead of franked and then this issue goes away? Is that possible? Is it possible for a LIC to do this?

If not, you would just invest in the S&P500 and generate your gains via capital growth etc. This looks to be a shorted-sighted, easy to get around problem for people if they chose to?