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Welcome to the ‘Have Your Say’ section for 2019. We have received thousands of comments on articles over the years, but here is a chance for you to set the agenda.

We have moved the 2018 comments here.

Cuffelinks often receives emails from readers offering opinions on subjects not directly related to any article, including feedback on the weekly editorial in the newsletter.

While Cuffelinks is not licensed to give person financial advice and often cannot respond directly, ‘Have Your Say’ is a place where you can share your opinion and engage with each other.

Comments must meet our community standards with no product flogs and no personal attacks. Keep it respectful and constructive.

Comments relating to a specific article should be posted with that article.

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150 Responses to Have Your Say

  1. Financial Adviser May 16, 2019 at 12:30 PM #

    Definition of Socialism: a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. The Labor Party wants to control all private wealth, starting with super. Their franking credit, trusts, caps on tax fees, SMSF borrowings, CGT and neg gearing policies are just the tip of the iceberg.

  2. Paul May 7, 2019 at 8:11 PM #

    Hey, What’s happening with the” Inverted Yield Curve?” Are short term bonds higher than long term?

    Was the previous inverted yield curve a precursor to the GFC. ?

    Paul.

  3. Jon Kalkman May 6, 2019 at 2:15 PM #

    Chris Bowen said today in the debate at the National Press Club with Treasurer Frydenberg: “if people get a cash refund for their excess franking credits, it means that in many cases there is no tax paid at all on our company profits like BHP, Telstra etc, and that is completely unacceptable.”

    The taxpayers he is referring to are retirees in a super fund paying a pension . Such a super pension fund has a zero tax liability and therefore at present, the fund receives a full refund for franking credits, since none of the credits are required to pay any tax.

    What he didn’t say, for whatever reason, is this state of affairs occurs precisely because the franking credit system was designed to ensure that taxpayers should pay tax on their dividends at their marginal tax rate and no more. If the tax rate is zero, then there should be no tax to pay.

    By extension, if these super funds do not get a refund fro franking credits, it means that the tax rate on shares at least (and only in an SMSF) is no longer zero as originally designed by Keating back in 1992. (It had nothing to do with Costello).

    So Chris, if that is the problem created by your mentor, Keating, why not fix it by taxing ALL super pension funds uniformly, That means taxing all pension funds, including industry funds and taxing income from all assets, not just shares. That seems to be fair.

  4. Anna May 2, 2019 at 12:58 PM #

    Great reading – Buffett and the letter exchange with Bowen re the franking changes the ALP propose

    Anna

  5. John Wilson April 28, 2019 at 10:47 PM #

    There are two other pernicious effects of Labor’s proposed policy on franking which have not received any comment.
    Firstly, they propose to impose a 30% tax on family trusts at trust level, rather than at the marginal rate of the beneficiary, as at present. That may well be above the tax rates of beneficiaries who are not using trusts as a means of minimising tax, but could be using them as protection against legal claims.
    Labor has given no indication of whether there would be any franking of the distribution, or whether there will be double taxation when the taxed distribution is received. Labor’s thought bubble needs to be clarified.
    Secondly, many people with modest income are able to qualify for the Seniors Health Care Card, provided their adjusted taxable income of a couple (ie taxable income including franking plus pre-tax super contributions) is below a threshhold, currently $86706. That certainly isn’t “wealthy”!
    There has been no comment from Labor on whether the adjusted taxable income would be changed to only include the franking credits that have been used rather than the full amount as at present.
    Unless the system is changed, some people will lose this benefit which is important, primarily because it reduces the cost of pharmacy prescriptions from around $30 to $6. If one is unwell, that could be a significant impact.
    Labor needs to clarify whether
    – there will be “franking” on the tax on family trusts
    – the basis for the threshold for Seniors Health Care Card will ignore unused franking.

  6. Elizabeth April 26, 2019 at 5:17 PM #

    Its actually the Greens that usually come second in Warringah, not Labor so with Zali & Abbott stoushing it out Labor may come 4th

  7. D Hamson April 26, 2019 at 2:49 PM #

    If its a “gift”, why provide that gift to anyone? Yet this proposal will gift franking to charities, endowments, the future fund, apra regulated funds and part pensioners.

    Franking credits are included in your taxable income. Someone earning $14,000 in dividends with $6,000 in franking has a taxable income of $20,000. If you don’t refund franking the after tax income is just $14,000, meaning effective tax (taxable income less after tax income) is $6,000 giving a 30% tax rate. Does the ALP want to tax low income earners at 30%?

  8. D Ramsay April 26, 2019 at 1:23 PM #

    Re the Fr Cr issue I quote…
    “Investors making changes such as these will ensure the $57 billion savings estimated by Treasury over a decade will not eventuate. Franking credits will be increasingly held by people who can use them, including large SMSFs, public funds and even charities (Treasury data shows 75 charities receive franking credits of over $1 million, worth almost $1 billion)”

    …here is proof positive that “thought bubbles” are not policies and that Shorten or Bowen (or both) can take a bow for lack of thought (i.e. stupidity) and a lack of research.

  9. michael April 19, 2019 at 7:47 AM #

    Most of the franking credits ‘gift’ is soaked up by people who are high income earners so whilst canning franking credits may be unfair to self funded retirees it is time to stop the feeding frenzy of the wealthy. They have enough outs of the tax system already and do not need handouts from taxpayers.

    • Terry O’Callaghan April 26, 2019 at 8:29 AM #

      Franking Credits are important for low income self funded retirees who have assets just above the threshold for receiving a part Government age pension. They will experience as much as a 10% drop in income dependent on the amount of Aussie shares held, making it difficult to make ends meet.

      • JOHN L M April 26, 2019 at 9:59 AM #

        Yes exactly. Of the 1777 submissions to the Inquiry, most were from low income individuals who stand to lose 30% of their incomes [eg (if senior, divs $21K, tax paid $9K — current income $30K. After ALP theft of TAX REFUND ENTITLEMENTS, a 30% reduction in income from #30K to $21K.
        If no SATO, divs $14k, tax paid $6K, total $20K. After Labour theft 30% less at total $14K.
        While employees on same income receive the refunds they are entitled to.

    • Chris April 26, 2019 at 9:14 AM #

      The franking credit refund policy of the Labour Party is not targeted at “high income earners”, but rather it is targeted towards SMSFs. The true test of a Policy’s intent is to look at the scenarios where the policy applies and does not apply:

      Scenario 1: Retired Couple have $1 million combined in Super savings in an SMSF which they switch to Pension mode meaning that the income on their $1 million is taxed at a rate of 0. They have all 90% of $1 million invested in fully franked dividend paying shares. As the SMSF does not pay any other tax, this couple will not be entitled to the franking credit refund.

      Scenario 2: The same retired couple switch their $1 million combined super savings to a superannuation fund (Industry or Retail does not matter). The switch to Pension mode meaning that the income of their $1 million is taxed at a rate of 0. They utilise the direct investments platform of their chosen super and have the same investments as what they had in their SMSF. As they are part of a large fund, it is highly probable if not certain that the Super fund is a net tax payer. In this case, the couple will be entitled to the benefits of the franking credit refund.

      This policy is indiscriminate to the level of income earned by an individual, but rather is a policy target at reducing the wide spread use of SMSFs irrespective of the actual income someone earns.

      I do not have an SMSF and do not plan on using one. I also do not benefit from Franking Credit refunds. However, I still think this is bad policy, as it can be easily avoided by changing tax structure. If this policy is passed, be sure that super funds will start advertising to SMSFs to switch to them to maintain their franking credit refunds.

      • JOHN L M April 26, 2019 at 10:06 AM #

        Exactly. It is a case of Shorten and the Propaganda Komisar Bowen doing the bidding of their Union paymasters to push people out of SMSFunds and into union controlled Industry Funds.
        Large SMSFs will take evasive action anyway.
        The policy is self defeating — to the extent it achieves that objective, the revenue projected will evaporate.
        So a repeat of the disastrous management of Wayne Swan years with massive budget deficits.

  10. JOHN L M April 18, 2019 at 9:30 AM #

    “If you are getting a tax credit when you haven’t paid any income tax, this is a gift …”. This from Shorten and Bowen is a GREAT BIG LIE and it should be called as such by the LNP .
    IT IS THEFT OF PEOPLES REFUND ENTITLEMENTS. A cute little mantra said endlessly with brevity and repetition. A total falsehood. For every $7 of dividends there is $3 tax withheld by company, just as they with hold tax from employees wages.
    We must declare it as TAX, the ATO calls it OUR tax, we must include in tax returns [just as employees must declare gross income including tax with held not just what is in the weekly pay packet. Employees then have deductions — which we will be denied under Labor — effectively claims negated for SMSFs, tax affairs and donations [which will have a major negative impact on income from donations] .
    The election may be winnable if LNP could get their act together and call Labor out: THIS IS THEFT/STEALING/CONFISCATION OF REFUND ENTITLEMENTS

    • Don Macca April 18, 2019 at 9:29 PM #

      John did you know, there are thousands of people not paying any income tax .They will get their GIFT of franking credits.
      They are members of APRA funds which include industry funds.
      Don’t want to join a industry fund: prefer to run your own super fund. Bad luck no gift for you.
      How can Bill say this is a fair go. Lets have a FAIR GO for every one.

    • Shiraz April 23, 2019 at 11:27 AM #

      Well stated John. You are 110 % correct.
      Franking Credit must be referred as Other Income and it can not be a gift because one has to earn a franking credit.

  11. Peter Wilkins April 18, 2019 at 5:37 AM #

    I find it hard to believe that Labour are going to take our franking credits. If you want to save money , look to skinny up politicians generous benefits , not everyday Australians.
    this election may be the first time that we do NOT support Labour

    • Paul Torkington April 28, 2019 at 1:24 PM #

      An interviewer could skewer Shorten or Bowen on their slogan “libs are for the big end of town”. Widow Smith has to lose $9000 franking refund from her $30000 SMSF retirement pension and manage on $21000 P.A. because the budget can’t afford it. The same budget is paying $200+ and $300+ thousand dollar pensions for ex pollies etc and they aren’t asked to give up a single $1.00 .Looking after the big end of town? The future fund has not yet paid any pensions. All from the budget.

  12. David Close April 17, 2019 at 11:42 PM #

    What sticks in the craw is that this plan does not treat everyone equally. The only fair approaches would be 1. Leave things as they are OR 2. Abolish all franking credits, after a 2 year deferral to allow those affected to adjust their finances.

  13. Lakshmi Krishnan April 17, 2019 at 6:26 PM #

    In specie transfer if it is not allowed, could result in a capital loss if you have to sell your shares at a time when the economy is sluggish in order to transfer your money to member direct.

    • Graham Hand April 17, 2019 at 7:56 PM #

      Hi Lakshmi, based on someone simply transferring from an SMSF to a DIO with the same shares, with a lag of a day or two, they are selling and buying in the same market.

      • Peter April 18, 2019 at 11:40 AM #

        For shares that have gained in value over the years, and for members in accumulation mode, wouldn’t an in-specie transfer avoid capital gains tax if selling/buying from a SMSF to a DIO?

      • Graham Hand April 18, 2019 at 11:43 AM #

        Hi Peter, as far as I know, DIOs don’t allow in-specie transfers (ie a transfer of the shares from one fund to another). They only accept cash. G

  14. Jim Carlton April 17, 2019 at 6:19 PM #

    “If you are getting a tax credit when you haven’t paid any income tax, this is a gift” – when I buy and sell shares, I pay GST. GST is a Goods and Service Tax. Yes, I pay tax!

    • Dudley April 17, 2019 at 9:05 PM #

      “I pay GST … Yes, I pay tax”:

      No good, must be income tax paid by you.

      Income tax paid by your employer or by your company and credited to you by ATO; all no good.

      No refunds unless ‘you personally’ paid income tax ‘in the first place’.

  15. Maureen Styman April 17, 2019 at 5:36 PM #

    I am one of those SMSF that receives refunds for my franking credits. I am 76 years of age, commenced work when I was 15 and continued to work untill into my 60’s. I receive nothing from centrelink and fully support myself. Following comments from Bill Shorten in your newsletter, I am also one of those who have recently had knee replacement surgery. For his information this surgery was fully paid for by myself and my health fund which is also paid for by myself.
    I am at the stage I am planning to downsize and had planned to add more to my SMSF but if Labour is voted in I will go in the opposite direction into something more grand
    and then hold my hand out for a pension. My Dad was a Labour man through and through but he would turn in his grave at how the Labour party has lost the plot.

  16. Philippe Prudhomme April 17, 2019 at 4:33 PM #

    How cynical,
    I will lose $30,000.00 in franking and it is just what we spent on private insurance and few surgeries between my wife I so far this financial year

  17. Ray Walsh April 17, 2019 at 4:21 PM #

    Shorten says this is tax refund is a gift. I see this as no different to your normal tax return where you get a refund if you have paid too much tax. Are they all gifts? This could only be classed as a gift to the Labor party if they get in and get this passed. This is free money to them at the expense of investors that have taken all the risks.

    • Tony April 18, 2019 at 10:29 AM #

      Oh dear! The imputation system was designed to avoid double taxation of dividends. The changes made by Howard virtually abolished tax on companies completely, so if shareholders receive a refund of franking credits, there is NO tax payable at all.
      How can that possibly be justified? Companies need to pay tax, in fact they pay $100bn a year. If all taxpayers got refunds, that’s a $100bn loss in taxation.
      How can you, Cuffelinks, or indeed anyone, agree with or support that position?
      And the funniest part of all this is that most of these people who are complaining are LNP supporters and voters, people who say they support low tax and fewer Government handouts!
      In fact they have been shown to be just hypocrites!

      • Graham Hand April 18, 2019 at 10:33 AM #

        Hi Tony, we are a forum for opinion, so when you say: “How can you, Cuffelinks, or indeed anyone, agree with or support that position?”, we are publishing many opinions. And we publish yours as well, and you are welcome to submit a more comprehensive article. G

      • Dudley April 18, 2019 at 11:04 AM #

        “if shareholders receive a refund of franking credits, there is NO tax payable at all”:

        Only if all shareholders have a legislated 0% tax rate.

        “goodbye to $100bn in taxation”:

        Franking credits are tax credits for tax paid by companies – not ‘gifts’.

        Shareholders are assessed for taxes on gross dividends (cash dividend received + company tax paid).

        To come ‘up to speed’, read:
        https://cuffelinks.com.au/franking-credits-made-easy/

      • Warren Bird April 18, 2019 at 11:21 AM #

        Let’s do this once more. The imputation system from its earliest conception is about full integration of the personal and company tax systems. Which means that companies are only a tax collection vehicle and don’t really pay tax themselves. Just as a sole trader pays income tax at their own rate including earnings from their business on their tax return, so imputation means that shareholders do the same. There isn’t really any company tax, there is only income tax levied on shareholders.
        The double taxation shorthand was merely a tool for explaining the impact at a time when few shareholders had a zero tax rate. It was never accurate.
        The ALP knew this when they supported the introduction of franking credit refunds.

  18. Denis Prodea April 17, 2019 at 4:18 PM #

    Well Bill let the companies directly distribute their earnings to their shareholders who invested their hard earned cash into them in the first place, without this potential Marxist Government creaming it off 1st. Then go to the shareholders and ask THEM for the tax on their income. How does your argument stack up then Bill! How many excuses can this mob try to concoct to steal money for their profligate grandiose but flawed ideology!

    • Tony April 18, 2019 at 10:34 AM #

      So let’s say goodbye to $100bn in taxation? What do you suggest we do to plug this hole? This is 20% of Government revenue. It will take a massive hike in other tax to make up the shortfall.
      This debate has reached a frenzy stage, and the echo chamber all these moaners are in ignores reality. Companies need to pay tax, and shareholders are not entitled to a refund of company tax.
      How hard is that to understand? It’s amazing how greed has overcome logic in this debate.

      • Warren Bird April 18, 2019 at 12:40 PM #

        Tony, what are you talking about? Total company taxation is just under $100bn, so I presume that’s what you have in mind.

        The system already imputes most of that as tax paid by individuals, across all the tax brackets. Hanging onto one part of the system – paying franking credits to those on zero tax rate – will not come anywhere near ‘costing’ $100 bn!

        The way it works is that company profits are treated as being earned by shareholders. (My, my how radical and right wing!) The tax already paid by companies is imputed to them. Those on a higher tax bracket have to top up the difference between their bracket and 30%; those on a lower tax bracket either use the credit to reduce the tax they need to hand over on other income they’ve earned, or if their credit exceeds their other tax obligations they also get a refund of the excess tax they were forced to pay.

        Company earnings ARE taxed and always will be taxed. But they’re not taxed as an entity separate from their shareholders, but are taxed in the end at the individual shareholder level.

        As I’ve written elsewhere, the end result is that total company earnings are actually taxed at a bit more than 30% because the average tax rate on shareholders is more than 30%.

        I’d be very careful who I was accusing of failing to understand the system, the economic dynamic of how it works and be very careful making silly statements like ‘greed overcomes logic’. It’s all perfectly logical – and I’ve already commented elsewhere today to dispel the greed myth.

        I prefer facts and analysis to emotional rants.

      • Jan April 18, 2019 at 2:02 PM #

        Tony, I agree with Warren Bird who has written several excellent articles that clearly explain the logic of dividend imputation, etc. See also, the Centre for Independent Studies, “Dividend Franking Credits Refunds: Principle vs Revenue” (refer CIS website), which concludes:

        “Refundability of franking credits was introduced in 2000 after rigorous review of the relevant tax policy principles and has not been challenged by subsequent review of the tax system. As long as the imputation system remains in place, refundability is a LOGICAL component of it and should remain in place. Any move to abolish refundability for revenue-raising reasons would fly in the face of the sound principle on which it is based.
        It is not clear how much additional revenue would be raised from abolition of refundability, but whatever the amount it is clear that it would be concentrated on a relatively small number of individuals and funds and would have a large absolute and percentage impact in some cases. The opportunities for taxpayers to rearrange their assets to avoid or minimise this impact are very limited.:

        Further, the ATO website says:
        “You are eligible for a refund of excess franking credits if all the following apply:

        +You received franked dividends, on or after 1 July 2000, either directly or through a trust or partnership
        +Your basic tax liability is less than your franking credits, after taking into account any other tax offsets you are entitled to
        +You meet our anti-avoidance rules, which are designed to ensure EVERYONE PAYS THEIR FAIR SHARE OF TAX.

        NB: The ATO clearly confirms that cash refunds are only given to those who pay their fair share of tax. If their fair share of tax is zero, then they have paid their fair share. So, following ATO logic, a taxpayer on a zero marginal tax rate is still a taxpayer. So cash refunds are not paid to non-taxpayers after all. Labor is also lying when it says that only entities and indivIduals who pay no income tax will be affected because unions, charities and the Future Fund WILL continue to enjoy cash refunds EVEN THOUGH THEY PAY NO INCOME TAX because they are also on a zero marginal tax rate..

        The curious thing in Labor’s plan is that back in 2000 when refundability was introduced, then Shadow-Treasurer, Simon Crean declared Labor fully supported it because it was, in fact, Labor policy which it took to the 98 election and which he said would assist low-income people. (see Hansard),

  19. Gary B April 17, 2019 at 3:29 PM #

    Shorten’s franking credit proposal will leave me short on how to pay for my council water and power bills. All labour is doing is penalising the people they are trying to support.

  20. Dudley April 17, 2019 at 3:11 PM #

    Shorten: “If you are getting a tax credit when you haven’t paid any income tax, this is a gift”:

    ‘If I let you keep any of your income it is a tax concession and a gift from me.’

    • Don Macca April 17, 2019 at 9:24 PM #

      If Shorten said : “If you are getting a tax credit when you haven’t paid any income tax, this is a gift”?

      Does he realise all APRA members not paying tax will receive their “GIFT” of franking credits. Surely he knows all industry funds are APRA Funds.

      Everyone should read Wednesday’s “The Australian”. The front page details major changes to the Labor web site. They appear to have completely removed the sheet on superannuation. So it may be they are about to change their policy.

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