The government has claimed that as many as 800,000 retirees could be set to lose out financially if cash refunds for excess franking credits are axed, taking away an additional income stream that a large number of senior Aussies rely on to boost their finances in retirement.
Labor leader Bill Shorten has vowed to get rid of franking credits if he finds himself in The Lodge after the next general election, a policy that the Coalition deeply oppose.
In September, following his appointment as Treasurer, Josh Frydenberg ordered the Standing Committee on Economics to look into the implications of removing refundable franking credits, inviting members of the public to submit their concerns in writing about Shorten’s so-called ‘retiree tax’.
Submissions to the inquiry close on Friday, November 2, and 240 Australians have already taken the time to submit their fears to the government, revealing their worries about having to live with just the Age Pension to support them, while others are concerned about the impact the proposed policy may have on their self-managed superannuation funds.
Margaret Menzies wrote: “I am concerned about Labours threat to Franking Credits. These are important to us to fund our retirement. I feel this is most unfair. We do not wish to live on the age pension.”
Peter and Evelyn Turner said: “It is unbelievable that Labour would even consider penalising those with a SMSF by removing the rebate of the dividend imputation. We have saved all our working lives and are fully self supporting. Our income is supplemented by the refund of the dividend imputation. Should this labour policy be implemented, it is conceivable that many more current independent retirees will end up accessing the government pension.”
Senator for Victoria Jane Hume is one of the Liberal politicians strongly opposed to the bill and this week she published a video spelling out in order to highlight Labor’s proposal to those who may not be aware of it.
The video, which has been viewed more than 5,500 times, explains: “If you receive dividends from Australian shares you could potentially lose thousands of dollars. Some of the worst impacted will be retirees who often rely on dividends from shares for income.
“Dividend invitation was introduced over 30 years ago to stop double taxation of dividends. Under Labor’s plan, you won’t receive the cash refund that you’re currently entitled to. It’s effectively a new tax that hits retirees the hardest.”
Franking Credits also known as Imputation Credits are a type of tax credit that allows Australian Companies to pass on tax paid at the company level to shareholders. The benefits are these franking credits can be used to reduce income tax paid on dividends or potentially be received as a tax refund.
The leader of the opposition has vowed to introduce legislation, should he replace Scott Morrison as prime minister next year, that will scale back the tax credits allowed under dividend imputation rules. He announced the plans in March, however, following backlash from the public and criticism from then-Prime Minister Malcolm Turnbull, he later announced an exception for around 270,000 pensioners, along with people in receipt of other welfare payments, from his proposed changes.
Minister for Health Greg Hunt described the policy as a “blatant cash grab”, saying: “Some of those worst impacted by this policy will be retirees who rely on income from shares in Australian companies – more than 800,000 individuals, 200,000 self-managed super funds and 2,000 super funds will be hit by Labor’s policy.
“This is a blatant cash grab from those who have taken responsibility to grow their nest egg and provide for their own retirement.”
Following the closure of submissions on Friday, the Joint Standing Committee on Economics will schedule a number of hearings for later this year to discuss their inquiry into the implications of removing refundable franking credits. A spokesperson confirmed to Starts at 60 that no dates have yet been set.
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