Franking credits proposal opposed, inquiry opens

The Institute of Public Accountants has stated its opposition to removing refundable franking credits as a parliamentary committee establishes an inquiry into its implications.

The inquiry from the House economics committee is set to begin public hearings in Melbourne next week.

IPA chief executive Andrew Conway said the inquiry will heighten community understanding of a well-established feature of Australia’s taxation system.

“The Labor Party is proposing to change the rules to remove the ability for individuals and superannuation funds to claim their full entitlement to franking credits,” Mr Conway said.

“The inquiry will highlight the significant implications attached to any change in government policy on refunding imputation credits.

“If we were designing a new tax system today, you would most likely not have full imputation where the taxation is assessed in the hands of the recipient and any excess franking credits are refunded.”

According to Mr Conway, removing refundable franking credits would be difficult to justify from a fiscal sustainability perspective in today’s economic circumstances.

However, Mr Conway noted that the refunding of imputation credit policy has been in operation for close to two decades, and removing it in a piecemeal way without dealing with the consequences is fraught with danger.

“The case for removing dividend imputation is not strong and any tinkering needs to be assessed against some alternative benchmark tax system such as removing dividend imputation entirely and replacing it with a discounted tax rate,” Mr Conway said.

“More importantly, we need to be looking at how we tax all forms of savings more consistently. A more holistic approach to taxing personal savings across all asset classes as recommended by the Henry review would be more beneficial than changing one aspect in isolation.

“We do not support any changes in the removal of refundable franking credits unless it is associated with more holistic tax changes to the treatment of savings more broadly. A survey of our members also shows that 95 per cent of respondents do not support any change.”

The IPA will be appearing before the inquiry next week.

4 thoughts on “Franking credits proposal opposed, inquiry opens

  • November 16, 2018 at 2:08 pm
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    If they persist in wanting to include and to add the dividends received by a taxpayer/beneficiary to his/hers yearly assessable income, and to also include the franking credits amount as well to that assessable income, they should in turn leave the system as it is at present. I do not support any changes in the removal of refundable franking credits in any ways or form, as it would create hardship to some self funded retirees and to the ones counting on that refund to subsidise or maintain their living standards.

  • November 16, 2018 at 4:59 pm
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    The franking credit proposal is tantamount to discrimination against self funded superannuated people who don’t pay income tax. We rely heavily for the income that this brings us annually and these dividends have already been taxed at the company level.

  • November 16, 2018 at 5:43 pm
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    Taxpayers have to include their imputation credits in their reported taxable income. As an example, consider a taxpayer who receives $ 30,000 credits but under Labor policy, can only use $12000 because of a carry forward tax loss or current year tax loss. This means he is paying income tax on $ 18000 that in fact he has not received. This is totally unfair and Labor will make taxpayers pay income tax on income they have never received.

  • November 19, 2018 at 3:27 pm
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    I wish to advise that I am dependent on the franking credits to help fund my pension. I am in a situation where I have to draw down a compulsory minimun pension each year which increases with age. I have acquired a portfolio of blue chip shares over 25 years and am now forced to sell these shares which provided a reasonable return to fund the cash pension. The banks then offer me two and half percent interest on a term deposit. Please ask the parliamentary committee would they accept such a deal? I would suggest that you ask the parliamentary committee to view the ABC 7:30 Report on 13 November when Paul Keating was discussing the plight of self funded retirees and also made the point that life expectancy for retirees will soon be 100 years. He made the point that these retirees will have to go on the aged pension well before the age of 100 years and suggested an insurance scheme to cover these retirees. I would suggest I can run my own superannuation fund better than any bureaucrat and let us abolish compulsory draw down each year of self funded superannuation pensions

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