Franking credits - gone?

Top of the head, about 85k franked (120k grossed up) per beneficiary (no other income) is the level at which no change...below that you won’t be happy.

 

I like it. May as well front run REITs and Utilities now, international dividend stocks as well.

 

Yep. This is exactly the first thing that concerned me. I'm not totally convinced it's a loophole either.

 

I bet Shorten's not thought of that.

 

Still you would be paying zero tax on dividend income.... a pretty good deal.

 

Yes. In effect if you don’t pay tax or lower tax then the franking credits are mostly lost. If say in Super pension you invest in an Australian company that has paid full company tax the investor has in effect lost 30% of the dividend. Whereas an unfranked dividend would be paid to the Super Fund in full with no tax to be paid by the member. Or am I missing something?

 

They're my thoughts too.

 

Sounds right. Now how about US Dividend stocks, effective rate 15% due to tax treaty. Matches accumulation phase tax rate, apply foreign tax offset. US “dividend aristocrats” here we come.

Someone start a fund.

As the saying goes, where there’s a Shorten, there’s a way.

 

Shorten has just given a shot in the arm to SMSF or those whose funds give flexibility to invest in non-franking industries. A bit tough for those who only get ASX 300 or limited OS exposure in their funds.

 

The issue is that REITs and Utilities will be bid up and the benefit will be chewed up by higher price. The market will adjust on both sides.

 

Boards will simply make the decision to offer unfranked or partially franked dividends only to remain competitive .

 

Capital structure of the business would need to change. They would need to be essentially trusts, pass through vehicles / stapled securities

Otherwise they still pay company tax - the dividend is the same amount without franking, no benefit to holders. They don’t find extra cash by part franking or paying unfranked divs if company tax has already been paid

 

Tax wise it may give ETFs (Trusts) an advantage over LICs (companies)?

 

Yes. Spot on. You don’t want tax being paid on your behalf - robs you of flexibility.

 

This isn't good policy, but is clever politics by Shorten. He can now make more promises of spending for the election at the cost of dividend investors. Win more votes and only take from those who were already losing under Labor.

 

Just about Every Superannuant in Australia will be impacted. The wealthy will lose more benefit but unlikely to have lifestyle impacted. The average Super member is likely to be impacted significantly.

 

Its strange policy. I can understand if Labor apply to trusts - but Super? seems like a massive free kick for LNP here.

 

Paul sums up its impact well here in relation to the average worker including union workers:

Shortens Tax Plan

 

Ah well, there goes my August bonus!
Marg

 

The announcement is that the proposal is meant to target self funded retirees. The proposal is unlikely to target any retiree who receives the Age Pension or anyone who has not retired yet. The proposal would hit 'reasonably' well off self funded retirees by thousands of dollars each year in their retiring years.

There is stress that 'refunds' should not be provided. In the best scenario of implementation when the proposal is approved is that the credit could become an 'offset'. The credit could become an offset to the self-funded retiree if there is income tax payable. I would hope for this outcome at least!

The assumption of this proposal is that people who do not receive welfare funding from the state in their old age must be well off. However, I would not like the imputation credit in SMSF denied to the self-funded retiree in order for the income tax to be paid. If it were, it would become a perverse tax proposal for targeting self-funded retiree in the misconceived perspective that it is good to denigrate attempts at self-reliance in old age.