Labor’s proposed changes to the franking system have the stated goal of righting some inequities in the present tax system.
We discussed in a previous article how these changes could damage the Australian economy and negatively impact businesses.
Nowhere is this problem made clearer than with the possible effects on self-managed super funds.
That’s what we focus on here…
Proposed changes to franking credits: main objections
The main objections to the proposed changes to franking credits when it comes to superannuation funds are two-fold:
1. People’s retirement income will be significantly impacted; and
2. The changes unfairly treat self-managed superannuation funds when compared to the larger super funds
Labor has promised not to crack under pressure from the many experts or consumer groups who oppose the changes.
They seem unwilling to listen to people’s valid claims.
Equality and fairness with superannuation?
If the Australian Labor Party is trying to create a fairer tax system, they should at least consider removing the unfair and anti-competitive treatment of self-managed super funds.
As widely reported and acknowledged by all experts, members of self-managed superannuation funds will not be able to claim these franking credit refunds in the future, with the proposed changes.
However, members of the large bank and industry funds will continue to receive this benefit - regardless of their member balance.
This is therefore nothing to do with equality and fairness.
If Labor is so committed to the policy, why have they not removed the exemption for the large superannuation funds, especially at a time when the bank funds have been shown to be a poor option?
Australians should be given options and control of how to invest their life savings and not be forced into limited options based on unfair tax treatment.
If the large super funds were included, the tax windfall would be significantly higher and remove this unfair treatment of the smaller players.
It would also remove the ability for people to avoid the tax. For example, one option for self-managed super funds that are impacted by this tax change would be to move to one of the large super funds.
This would negate a significant portion of the expected tax savings collected.
However, a change that included the large players would remove this option and increase the windfall to the government.
If it ain’t broke why try to fix it?
As discussed in our previous article, we do not believe this policy should be put in place at all.
The dividend imputation system and refunds currently act in a very fair way to ensure that all Australians are taxed according to their normal tax rate.
We feel that it should be left as it is: “If it ain’t broke, don’t fix it”.
However, if the Australian Labor Party are committed to pushing ahead with this policy, they should show their commitment and at least make it fair for everyone concerned - not hit SMSF owners while letting the big players off the hook.
Any questions about how the proposed changes to franking credits may affect you or your business? Contact us here.