Franking Credits

Labor’s Franking Credits Plan Will Hit Retirees

They pride themselves on being the party who looks out for the little guy.

But Labor’s idea to fix the dividend imputation, or franking credits, will ultimately be taking money right from the profits of retirees — who have been working to the bone their whole lives.

They plan to end the Howard government’s regime of giving shareholders without a tax liability a cash refund on excess franking credits from shares they hold.

That means the self-funded retirees who rely on this income will be forced to dip into their superannuation rather than keep it as a form of wealth accumulation.

Labor’s response? They say there are only a small number of these kinds of shareholders, and ultimately the $55.7 billion in revenue which their plan could raise outweighs the damage it does to these unlucky few.

The damage in a nutshell

Under the proposal, this $55 billion in extra taxes will be put on Aussie retirees.

Labor has tried to mitigate this fact by painting up this image of rebate-less retirees as money-hungry fat cats with loads of investment properties and high profit-earning businesses.

But recent analysis shows that this isn’t the case at all.

Professor of economics at RMIT University and adjunct fellow of the Institute of Public Affairs, Sinclair Davidson, found through his study that 56% of those currently receiving these cash rebates are women.

Of these women, 68% are over the age of 60, and 47% of this group are either single or widowed.

And it’s this vulnerable demographic which Labor is willing to let suffer in order to stick it to the Big Four.

A slap in the face, to say the least. Especially when you consider that these tax hikes could have a range of flow on effects to the broader economy.

Analysis says banks won’t be heavily affected by changes to franking credits

According to Citibank’s analysis of the impact of this new proposal, it doesn’t look like it will be effective in the right places.

Citigroup said ‘potential changes to dividend imputation and the removal of cash refunds from investors is likely to have a meaningful impact on bank shareholders’, the ones relying on rebate payments.

But in terms of the banks themselves, Citigroup found that the change ‘could impact major bank valuations by up to 13 per cent.’

This is less than the impact the royal commission itself had on the banks, where we saw share price falls of almost 20%.

Therefore, Citigroup believe that the election itself could raise enough turmoil that will flow into the wider economy, insisting that the banks should ‘not be feared’.

Labor have their own interests in mind, not yours

But what voters should remain wary of is Shadow Treasurer Chris Bowen’s attitude towards scepticism of Labor’s proposal.

He says of those opposing the plan, they’re ‘entitled to vote against us’.

So it seems, rather than looking out for the little guy, Labor are only looking out for the ones that look out for them.

That’s not leadership. That’s blackmail.

The Australian Tribune Editorial

The Australian Tribune Editorial

The Australian Tribune is an unorthodox news service. Your Australian Tribune editorial team deliver the unfiltered stories that could impact your daily life — political and economic stories you’re unlikely to get anywhere else. And we’re not afraid to step on some toes to do it. We are honest, conservative and never dull. We are an independent service, meaning we don’t answer to shareholders or outside advertisers. This helps avoid conflicts of interest that inhibit mainstream sources, which keeps our voice independent. The Australian Tribune is owned and operated by Port Phillip Publishing.
Comments: 2

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  1. Labor’s franking credits policy is manifestly unfair.

    If a superfund with a 0% tax rate receives a dividend from which 30% tax has been deducted, that 30% is refunded to the fund, that’s only fair.

    If a 45% taxpaying tax payer receives a dividend from which 30% tax has been deducted, that taxpayer simply deducts the 30% from his tax rate of 45% and pays only 15%.

    On what logic do you deny the super fund their 30% refund, but continue to give the 45% guy his 30% tax discount?….the fact that one pays tax, and the other does not is moot.

    Giving a $1,000 cash refund, or giving a $1,000 offset against an otherwise fully payable tax bill has exactly the same budgetary effect. $1,000 going out is the same as $1,000 not coming in.

    How is this fair?

  2. Labor’s franking credits policy is manifestly unfair.

    Giving a $1,000 cash refund, or giving a $1,000 offset against an otherwise fully payable tax bill has exactly the same budgetary effect. $1,000 going out is the same as $1,000 not coming in.

    How is this fair?