- Published on 30 Mar 2018
- - Transition to Retirement
If you’ve been keeping up with the news lately you may have heard of Labor Leader Bill Shorten’s policy proposal to end cash refunds on excess imputation credits. His latest proposal aims to shut down the imputation scheme created by John Howard and Peter Costello, which allows individuals and super funds to claim cash refunds on excess franking credits. The Labor leader’s latest proposal aims to restore the system back to its original design that was implemented by Paul Keating in the late 1980s. However, his proposal has been met with fierce backlash from individuals stating that the new policy is not targeting “rich”, “high-income earners” but ordinary, simple, everyday people with a few shares as well as self-funded retirees.
Shorten has stated that the Howard-Costello extension of the imputation scheme “entirely distorts the original design of the dividend imputation system”. His promise to end cash refunds on franking credits sees an estimated savings of $11.4 billion. In a speech in Sydney Shorten referred to the current arrangement as an “unsustainable largesse for high-income earners” and if it were to be left unchecked it would cost the budget “$8 billion every single year”.
The Labor leader is now encouraging investors and retirees to offset any losses from imputation credits with “good bet” property investments claiming that “it may well be that some people will want to invest more in property”. He states that “Australian property is a good bet” despite poor rental returns, little capital growth, and tougher lending conditions seen in the market. And let’s not forget the amount household debt caused by too much property borrowing.
Despite the money-saving claims made by the Labor leader, many are stating the new proposal will impact Australia’s retirement income system and penalise those who have worked towards becoming a self-funded retiree. While Shorten believes his proposal will target the “rich” the Australian government has stated that 97% of people who receive franking credit refunds have a taxable income below $87,000 and more than half of the beneficiaries have taxable incomes below the tax-free threshold. The Labor leader’s proposal will impact the income of a million Australians many of whom are over the age of 65. Australians have called his proposal “inept”, “moronic” stating that “our politicians have performed so very poorly in representing our interests”. Others stated that “any of those investors who vote for Shorten and his comrades at the next election should have their financial sanity tested”.
Shorten’s policy proposal has definitely caused a lot of uproar and created a lot of political noise; with the election fast approaching many Australians are using any opportunity they have to voice their opinions.
LifeTime Financial Group are specialist (holding appropriate accreditations) advisors who are ideally positioned to assist you.
Would you like to discuss your personal position and the impact of franking credits on your investments further with one of our highly qualified financial planners? Why not call us today on 03 9596-7733. There is no cost or obligation for our initial conversation/meeting.
Written by Anthony Stedman of LifeTime Financial Group. A leading privately owned Melbourne based Financial Planning practice.