What the Labor franking credit change means for you
Rede Accountants Gold Coast, Brisbane & Toowoomba
Labor announced a policy that there would be no refund of excess franking credits for any taxpayers.
Many Self Managed Super Fund’s (SMSF) in pension phase receive good refunds that top up their capital balances.
Per Shorten: It will only impact some taxpayers although it will save $5 billion per annum!!!
The policy was not well received by tax professionals, who immediately called out on its broad-ranging impact. Many pensioners would be short-changed!
The Labor opposition then backpedalled on its reform of excess dividend imputation credits, confirming significant carve-outs for older clients.
Pensioners would be exempt from Labor’s plans to end cash refunds for excess dividend imputation credits.
The exemption for pensioners will come in the form of a ‘Pensioner Guarantee’ scheme.
SMSFs with at least one pensioner or allowance recipient before 28 March 2018 will also be exempt from the changes.
However, high-net-worth Australians and SMSF trustees are still a significant focus for Labor in its tax plans.
Many have commented that high-balance SMSFs have already had their access to tax concessions readjusted through the advent of the transfer balance cap limit on tax-free earnings in retirement.
In reality, the transfer balance cap is limiting excess franking credits that would have been paid to SMSF members with large balances.
Under these rules, SMSF members with more than $1.6 million will be paying tax on some of their earnings that will offset the value of their franking credits, limiting their refunds
Add this to their other tax policies:
- Trusts to be taxed.
- Negative gearing investment after 1 July 2017 to be slashed.
- Capital gains discount to be cut from 50% to 25%.