Nana tax

Discussion in 'Property Market Economics' started by JohnPropChat, 29th Jan, 2019.

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  1. JohnPropChat

    JohnPropChat Well-Known Member

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    Labor's franking credits plan adds up to a Nana tax - Google Search

    Some 6.1 per cent of taxpayers appear to earn excess franking credits – less than the 8 per cent Labor claims. That could be good or bad for Labor's expectations as to revenue.

    So the next question is, who are these 6.1 per cent?

    Women make up 56 per cent of taxpayers earning excess franking credits but only 48 per cent of the sample data.

    Of those women, 68 per cent are over 60. Labor wants to tax your Nana. But maybe Nana is rich. Maybe Nana and Pops have organised their affairs so that the share portfolio is in Nana's name so as to minimise their joint tax liability.

    So I went and had a look at the total and taxable incomes for all women and then those women with excess franking credits.

    Taxable and total income figures for those women with excess credits tended to be lower than all women on average, and for each age group.

    To be certain that this wasn't due to tax planning I then added the franking credits back to total income and recalculated all the average and found the same result.

    These women are not "rich" and, on the assumption that not reporting spousal details indicates single status, some 47 per cent of these women are either single or widowed.

    So a whole lot of (widowed) elderly women are about to face a marginal 30 per cent tax rate under a new Labor government, and will lose a portion of their current income.

    The numbers go down once I account for the pension guarantee that Labor has proposed – but not by much. We are being invited to believe that this tax grab on the elderly won't have any flow-on effects to their children and loved ones.

    What could these women do to "avoid" the tax on their livelihoods?

    I expect that many will sell down their share portfolios to qualify for the pension (or for more of the pension) and use the proceeds to renovate their homes.

    I doubt that this is the policy intent, but it does suggest Labor will raise a lot less revenue than it imagines, and that the social costs of this policy are higher than they anticipate.
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    I always thought there was something shady about nannas. :eek:
     
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  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    They're also the most prolific users of the $100 note. Them and drug dealers.

    This really is short sighted planning on Labor's part. Fairly consistent with most of their proposed tax reforms.
     
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  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Most self funded retirees hold $$$ in super and also outside super. Women would comprise a unusual statistical % since fewer women aged 45-65 work vs men and where their husband may the investments are commonly held by the non-working spouse and not jointly unless their incomes are largely the same (which is a small %). This achieves lower tax rates. Women statistically also have less super than men.

    Non working spouses also own less investment property in a single name. I saw the stats a few years ago its like 80% are in joint names. Of the other 20% its split - 20% in wifes name and 80% in husbands name.

    So what Shortens policy does is punish low tax rate spouses by cancelling the franking refund benefit however if the higher income earner declares it then there may be a tax shortfall. ALP wins each way.

    This year I am advising each SMSF and dividend shareholding couple of the equivalent impact of the proposed ALP policy. Its not uncommon to see $8-$15K per couple PLUS a further $8K+ for a SMSF. Only truly affects self funded retirees. Many of these wont have any form of benefits and may get $0 from his promises.

    I know of not one who plans to divest their super to get a pension. Its like giving away $500K (each) to get $19K a year. And can fall foul of the asset gifting rules.
     
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  5. Marg4000

    Marg4000 Well-Known Member

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    Well, I’m a nanna and I hold shares outside of super.

    I don’t lodge a tax return as my income (outside of super payments) is below the threshold, and I have no tax withheld anywhere. Not sure if people in my position are included in above calculations. I simply lodge the form to claim franking credits.

    I will lose my franking credits as we don’t receive any pension.
    Marg
     
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  6. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    You are the sort of person they are targeting Marg.
     
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  7. Marg4000

    Marg4000 Well-Known Member

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    Yep.

    Can’t even get a health card.

    Politics of envy alive and kicking!
    Marg
     
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  8. Nodrog

    Nodrog Well-Known Member

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    What irritates me is that many supporters of Labor’s franking credit policy including the younger cohort seem to think it’s a great thing to shaft SMSFs and the like because they are all deemed super wealthy. But a couple of main points are often being missed.

    Firstly the new policy has next to no impact on most Industry / Retail Funds, regardless of the SIZE of the members balance, but heavily penalises SMSFs. Yes there are a minority of SMSFs with obscene balances but this sledge hammer approach will also penalise many SMSFs who are of much lesser means.

    Secondly those with smaller SMSF balances who in good faith followed the rules for nearly two decades are having potentially up to one third of their income taken away at an age where they can’t return to work etc to make up the difference. Labor who in the case of negative gearing are saying that they believe existing investors should be grandfathered are applying no such rule to their franking credit policy.

    I, as a SMSF trustee, will be happy to give up this benefit if those of lesser means aren’t too heavily penalised and importantly the policy is APPLIED EQUALLY TO ALL regardless of whether they invest in personal names, Industry / retail funds or SMSFs.

    Super members should all be treated equally regardless of which structure they choose to invest in!

    This policy will have minimal impact on the targeted group of the very well off. However it will be devastating on self funded retirees of lesser means!
     
  9. Deck

    Deck Well-Known Member

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    Franking refunds are a very bad use of my tax $, another Costello permanent gift to grey voters from a temporary windfall.There would be no issues with Franking if not for the tax free pension phase, this is the one that will have to go anytime soon as totally unsustainable (more and more retirees)
     
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  10. Nodrog

    Nodrog Well-Known Member

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    Robert Gottliebsen summed up the discrimination inherent in this policy very well:
    Bowen is dividing retirees with exactly the same assets and income into two baskets – those who receive cash franking credits and those who do not. Those with their assets invested with industry and retail funds will receive the credits; the rest miss out. Quote: “Taxing people on the basis of who manages their money is without precedent in the developed world.” (The Australian, 23/1)
     
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  11. Deck

    Deck Well-Known Member

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    The policy has been announced long before the elections, investors have time to change their investments settings.Some unsustainable entitlements have to go from time to time
     
  12. JamesP

    JamesP Well-Known Member

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    The joke about franking credits is the company is meant to pay the tax.. But companies and shareholders both pay no tax anyway.
     
  13. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    GST was introduced to tax retirees - if they don't earn income nothing to tax, but they do spend so that can be taxed.
     
  14. PandS

    PandS Well-Known Member

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    huh? you cant get franking credit if you don't pay tax, to build up franking credits companies got to write company tax cheque to ATO
     
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  15. willair

    willair Well-Known Member Premium Member

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    Government is not a solution to our problem, government is the problem. ... Government does not solve problems; it subsidizes them. Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it. ... The problem is not that people are taxed too little, the problem is that government spends too much.
    Ronald Regan..

    Many versions of the above have been repeated and rediscovered all through history ,and Shorten does not have the keys too the lodges wine cellars just yet..
     
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  16. Deck

    Deck Well-Known Member

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    Agree, to much on Tax Expenditures ;-)
     
  17. kierank

    kierank Well-Known Member

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    Can you provide of list of where you feel Government makes good use of tax $?

    My full list is detailed below:



    :eek:
     
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  18. kierank

    kierank Well-Known Member

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    First time I have read/heard that quote.

    Absolutely love it.
     
  19. kierank

    kierank Well-Known Member

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    What a stupid comment!!!

    What happens if the ALP doesn’t win or they can’t get their policy through the Senate or they have to water the policy down to get it passed or ...

    “Jumping at shadows” is NOT a great strategy IMHO.
     
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  20. Deck

    Deck Well-Known Member

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    education, police, medicare are probably fine, tax expenditures (well over $100B, highest in the world) are mostly waste/favor misallocation, I would prefer lower taxes