National Seniors will make a submission to the inquiry into the implications of removing refundable franking credits, announced recently by the House of Representatives Standing Committee on Economics.
Chief Advocate Ian Henschke said the policy had the potential to hurt millions of Australians rather than the wealthiest 10 per cent of self-managed super funds as Labor had claimed.
“When Opposition Leader Bill Shorten announced the proposed policy earlier this year, it applied to everyone receiving franking credits on share dividends, including pensioners,” he said.
“National Seniors played a major role in condemning the policy because it would hit pensioners and other low-income retirees hard.
“Labor subsequently changed its mind, announcing a ‘Pensioner Guarantee’ to exempt them from the policy which would have cost age pensioners a total of $3.3 billion over the next 10 years (if Labor wins power at the next election).”
National Seniors had joined with several other groups to form the Alliance for a Fairer Retirement System to boost its efforts on behalf of self-funded retirees, many of whom would be hard hit by the policy.
Mr Henschke urged members to send their stories about how they would be impacted to National Seniors at firstname.lastname@example.org. They should also make submissions direct to the inquiry.
According to the Alliance for a Fairer Retirement System, the Labor policy would impact people on modest incomes the most, rather than only targeting the wealthy.
Based on analysis of ATO and Treasury data, the policy had wide-ranging financial implications for Australian shareholders on incomes less than $65,000pa; self-funded retirees; age pensioners investing through unit trusts; self-managed super funds; small APRA-regulated funds; large retail APRA-regulated funds; and retired small business owners with equity in their companies.
Announcing the inquiry, Economics Committee Chair Tim Wilson MP said it would address “legitimate” community concerns about proposals to remove cash refunds for their full allocation of franking credits and amounted to a tax on the savings of retirees.
"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," Mr Wilson said.
The Terms of Reference for the inquiry are for the committee to inquire into and report on the use of refundable franking credits, their benefits and the implications of their removal, including:
- Analysis of who receives refundable franking credits, the opportunities it provides to offer alternative savings and investment vehicles to low- and middle-income earners, and the impact it has on lowering tax bills;
- Consideration of how refundable franking credits support tax principles, particularly implications for tax neutrality, removal of double taxation and fairness;
- If refundable franking credits are removed, who it would impact and how and the implications from expected behavioural change by investors, including increased dependence on the pension; stress and complexity it will cause for Australians, including older Australians, to adjust their investments; if there are carve outs applied, what this might mean for additional complexity, uncertainty and fairness; reduced incentives to save and distortions to which asset classes are invested in and funds are used; and the reliability of providing a sustainable revenue base over the longer term.·
Submissions are being sought by Friday, 2 November 2018 although submissions will be received throughout the inquiry. Submissions can be made online or by emailing email@example.com.
For information about the inquiry, visit the committee’s web page.
Inquiry updates, submissions and public hearing transcripts will be published as the inquiry progresses.