Many SMSF trustees rely heavily on the Top 10 stocks on the ASX for income including franking, but the capital preservation has not been good. The franking debate was a good reminder to reconsider the asset allocation.
Tag Archives | franking credits
Let’s set this straight for the final time! Chris Bowen often used the example of a nurse on $67,000 who was at a significant disadvantage versus a retiree receiving franking. In fact, the outcome for both is almost the same.
Labor justified its franking credits policy based on the cost rising 10-fold since 2001 and heading towards unaffordable levels. But were the numbers right and would the savings ever have eventuated?
The results of three studies suggest that companies undertake less tax avoidance due to franking credit refundability. It gives an incentive to pay corporate tax and franked dividends to satisfy Australian shareholders.
The assumption that being a member of a large pooled fund will protect franking credit refunds, and the lack of concern about the impact of Labor’s capital gains tax change, both require greater scrutiny.
Much has been written about Labor’s franking policy, so we bring together a range of possible strategies. It’s likely that even if implemented, it will not be in its current guise, so anyone affected should wait before taking action.
Cuffelinks has received over a thousand comments on Labor’s franking credit proposal. Here is a selection in favour of the policy to balance the generally critical nature of most comments and articles on the policy.
Amid the many strategies proposed to overcome Labor’s franking policy if adopted, often overlooked is building a portfolio of the right types of bonds and hybrids as an alternative source of income.
This analysis suggests that Australian investors who lose franking credit refunds under the Labor proposal should significantly increase holdings of global equities to meet an efficient investment frontier.
Labor’s franking credit proposal will reduce the income of many retirees who do not believe they are wealthy. Here’s an exchange with a reader who just wants an answer to “Is it fair?”
If Labor legislates to withdraw franking credit refunds, retirees have an alternative for their pension superannuation to retain the refund. It shows the proposal does not have ‘horizontal equity’ between structures.
The finding of the Report is that Labor’s franking credit policy is inequitable and flawed, but many say the inquiry was politically-motivated, as the Labor members of the committee deliver a dissenting report.
A reader observed that the Australian Financial Review reported that ‘member direct’ offers will not receive franking credit refunds. Some industry funds have confirmed their options operate in one pool.
The design of superannuation is part of a social contract, and people who do not understand the long-term context are often offended that super funds should be tax-free in retirement. Don’t blame Peter Costello.
Almost 2,000 people completed the franking credits survey, with 84% opposing the Labor proposal. Surprisingly, over half intend taking some action to mitigate the consequences.
Amazingly, SMSF pensioners invested in Australian shares will be much worse off under the Labor franking policy than in the ‘bad old days’ when their pensions were taxed.