Franking credits - gone?

Here here

 

Article on topic

What to do about franking credits

 

Does it mean @Terry_w 's excellent $95K per annum dividend income 'tax free' strategy is toast if Labor get into power and forge ahead with this??

 

The most interesting rumour I heard was Vanguard we’re looking at potential fund(s) to avoid the worst of Labor’s proposed change. If this is true I would love to know what they’re considering? Is it just a fund of no / low franked shares, AReits and Infrastructure etc or using a Pooled Fund as a single tax payer then able to utilise franking credits in favour of the unit holders?

The mind Bogles.

 

Good article, I like the first 4 points::
Here are a few points:

• It may never happen. Labor may not win the next election.
• Even if Labor does win the next election, they may have to water down the somewhat unforgiving stance they have taken so far. They can afford to play tough right up until they lose the votes of 660,000 SMSF superannuants. If they need them, this policy will be reviewed and may even be forgotten. Forgiving it might even win them votes they weren't going to get, such will be the relief.
• Even if Labor does win the next election and pushes ahead with an uncompromised policy on this issue, they still have to get it legislated. If there is a hung parliament, even if there isn’t, they may still struggle to achieve it.
• Even if Labor does win the next election and get the changes legislated the current intention is that it would only be introduced from June 2020 onwards. In which case you still have this tax year and the next tax year to collect franking credits and have them refunded (depending on whether Labor changes the timetable). That 22-month window of opportunity may lend even more emphasis to being in stocks with fully franked yields this year while you can still utilise the imputation credits. Companies will also have this small window of opportunity to empty any bloated franking accounts through share buybacks with a large dividend component and through special dividends with franking attached. It may just be the case that the 22 months before June 2020 end up being a super bumper year of franking giveaways by corporate Australia. So don’t jump out of the big fully franked high yield stocks yet.

 

In other words:

"Don't Panic."

Good advice from Corporal Jones or Douglas Adams whichever you prefer.

 

Not at all. Doesn’t change it whatsoever.

Franking credits are not being taken away.
Franking refunds have a small chance of being tempered with.

This tax strategy is not based on the franking being refundable.

95k fully franked will still mean 135k grossed up for franking and 95k after tax, meaning no out of pocket tax. Strategy same as before.

 

LOL - OMG Nodrog - you are such a Bogglehead these days!! (and amusing).

 

Even if it did happen for those with a great chunk of franked shares in SMSF “accumulation” (> pension Limit) and personal name(s) the impact is not too bad. As usual it will be those in the low to middle bracket that get hit hardest.

 

I haven’t read Terry’s article in ages but loss of franking credit refunds will be painful for those with small to modest franked share holdings as their main income source. Less to live on / reinvest.

However the dividend approach works wonderfully regardless of franking. Although these charts are likely showing the “optimal” outcome Thornhill followers will be aware that his charts DON’T include franking credits:

ACCUMULATION:


DECUMMULATION:

 

Personally I don't want to walk down the street in a society (like the US) where large numbers of people have little access to education or healthcare and are living paycheck to paycheck. It breeds crime and a cancerous "everyone for themselves" mentality. Pretty happy for my taxpayer dollars to get spent on certain things to maintain the societythat we have. As long as reasonable efforts are made to clamp down on people trying to rort the system.

 

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Agree for the most part, i personally dont care about people welfare "rorting" (most welfare other than pension is not sufficient imo) .... Better things to concern my time with. I find the lack of awareness of some people (no reference to you or your post) about how they earned their wealth without any assistance from the state amusing....
[

 

I am in complete agreement, and mainly added the last statement about rorting the system to appease others

 

Inquiry launched into implications of refundable franking credits
Eliot Hastie
20 September 2018
The House of Representatives standing committee on economics has announced an inquiry into the implications of removing refundable franking credits.


Chair of the committee Tim Wilson MP said that refundable franking credits were core to the financial security of many retirees.

“The ability for investors, including individuals and superannuation funds, to claim their full credits is an established feature of our tax system and is core to the financial security of retirees,” he said.

He said that there were legitimate concerns about the proposals to remove the cash refunds and argued that it amounted to a tax on retirees’ savings.

“The committee is examining what impacts the removal of refundable franking credits would have, particularly on retirees who have made long-term retirement saving decisions based on their ability to claim refunds on their franking credits and whether it will compromise their financial security,” said Mr Wilson.

The terms of reference for the inquiry are to inquire into and report on the use of franking credits, including an analysis of who receives refundable franking credits and the opportunities it provides.

The inquiry will also investigate how refundable franking credits support tax principals and if they were removed who would be impacted and the implications it would cause.

In March this year, Labor leader Bill Shorten announced that under a Labor government, individuals would no longer be able to claim cash refunds on excess imputation credits.

The move was widely panned by the financial service industry with SMSFA chief executive John Maroney telling InvestorDaily’s sister title Nest Egg that the proposal unfairly targeted a sector of the super system that had worked towards self-sufficiency.

 

This policy is proof of Labour's stupidity. Although I consider our two major parties dumb and dumber, just trying to work out which is which.

 

An early article with less of the emotion compared to some others:

How will Labor's tax changes affect Australia?

 

Cheers, . I'm wondering how long the inquiry will take and what would happen should an election occur before the inquiry outcomes are published. Regardless of who wins, these things are often put on a very back burner.

 

How long? Ahh.... the $64.00 question,still regardless of outcome of the election perhaps it would still go on if not completed by then as wouldn't be surprised if Labor realises it was a blunder & would like an 'out'.

 

Franking exchange: Chris Bowen and Geoff Wilson battle over 'dodgy' petition

Full article here

Cheers,
Oracle.

 

Is there a link to the petition? Thanks Redwing for posting.