Robbing Granny in the name of Paul

Dr Don Hamson

When I was first asked to comment about the ALP’s proposed scrapping of franking credit refunds my response was I was “flabbergasted”. “Flabbergasted” that the party whose Treasurer Paul Keating created franking credits would cut those benefits accruing to retired workers, “flabbergasted” that the Leader of ALP Opposition who earns over $375,000 a year would begrudge retirees receiving around $5000 a year on average, “flabbergasted” that the ALP would be offering tax relief to low- and middle-income Australians whilst pulling benefits from the lowest earning individuals who don’t even earn enough to pay tax, and finally “flabbergasted” that it is claimed that “this change only affects a very small number of shareholders”.

Having had time to reflect on this change, read through the fine print and discuss it with a number of people within the industry – and I thank those clients for their thoughts – my views have changed somewhat, but not necessarily in a positive sense.

“ Firstly, this change only affects a very small number of shareholders who currently have no tax liability and use their imputation credits to receive a cash refund.”

“1.17 million individuals, and superannuation funds”

Bill Shorten speech to Chifley Research Centre as quoted by SMH “Labor to target rich retirees in budget fix” 13 March 2018.

Discriminatory policy

We think this is a very discriminatory policy. Whilst we are happy that charities and not-for-profits are exempted from the changes, we are not so happy that the likely worst affected are the very lowest income earners with small holdings of Australian shares.

It is also discriminatory between different types of superannuation funds. Members of mature superannuation funds are discriminated against versus members of less mature funds. The most mature of funds are Self-Managed Superannuation Funds (SMSFs) whose members are all retired, and they would receive no franking credit refunds. The least mature or growing funds are funds largely dominated by younger accumulation phase members with a relatively small proportion number of pension members. These growing funds will be paying significant net tax to the government since the vast bulk of their fund members are in accumulation phase, paying 15% tax on fund earnings together with contributions tax. It is our understanding that pension phase investors in these least mature funds would still be receiving the full value of franking credit refunds under this proposal. The growing fund won’t be getting a refund of tax from the government, but within the fund pension members effectively get a full refund via offsetting (reducing) some of the net tax payable at the overall fund level. A $1m pension phase member of a growing fund would receive full value for franking credits, but the same $1m pension phase investor would not if they were to establish an SMSF. This proposal is clearly discriminatory, and if implemented would favour growing funds such as many industry funds, over SMSFs.

But we don’t believe this discrimination is restricted to SMSFs. Any superannuation fund dominated by pension phase investors will likely stand to lose the value of some or all of franking credits. Mature and often closed defined benefit funds would fit into this category. Some of these funds may be fine in financial years with good investment earnings, but may lose some franking credits in years with low or negative investment earnings where tax payable on accumulation phase earnings and contributions are less than the value of franking credits. We know of a few funds that are government or industry based which may likely be immediately impacted should these changes be implemented.

Industry ticking time bomb

We believe this change may ultimately impact a much greater number of Australians at some stage in their life than the current 1.17 million individuals targeted by this change. Whilst the proposed changes will primarily currently impact mature pension phase SMSFs and low income investors, we believe as the superannuation industry matures as a whole, as more and more members of pooled superannuation funds migrate to pension status, the loss of franking will likely start to impact a growing number of government, retail and industry funds. And these changes would then impact the returns and fund balances of pension phase members of those funds be they rich or poor.

Approximate $5000 a year impact

We estimate that denying the refund of franking credits will reduce the returns for pension phase SMSF by approximately 0.5% pa, meaning a retired couple with a $1m superannuation balance would be $5000 worse off each year, or a retired couple or individual with a $500,000 superannuation balance would lose $2,500. Now this might not sound a lot, but $50-$100 per week makes quite a difference for a retiree. It might mean being able to eat out once a week, take an annual domestic holiday, afford the expensive running costs of air conditioning or cover the cost of a cataract operation.

“$50-$100 per week makes quite a difference for a retiree.”

Our estimate of the impact of scrapping imputation credits is based on our submission to the Tax Discussion Paper entitled “Foreigners set to gain at the expense of Australian retirees?” (April 2015). We based our estimate of the impact of imputation assuming an average SMSF exposure to Australian shares, and the franking credit yield of the S&P/ASX200 Index. Investors with higher allocations to Australian shares, or allocations to higher yielding Australian shares could earn even higher levels of franking credits and would thus stand to lose more.

Impacts the lowest earning individuals who don’t even earn enough to pay tax

Treasury’s analysis of ATO data indicates that 610,000 Australians in the lowest tax bracket (earning less than $18,200) would be impacted by this proposal, with a further 360,000 individuals impacted in the $18,201 to $37,000 tax bracket. Given this, I should not have been surprised that someone like my mother, who recently passed away, would have been significantly negatively impacted by this change. My parents worked hard all their working life, judiciously investing savings into the share market, managing to save enough to largely self-fund their retirement. They retired prior to the implementation of compulsory superannuation, so their share investments were held outside superannuation. My mother lived off the earnings from those shares, but she rarely earned enough to actually pay income tax, but I can assure you that she dearly valued the franking credit refunds which boosted her modest retirement income. When she was well they enabled her to take the odd holiday, and when she wasn’t so well, they helped pay the medical expenses.

Closing the gate after half the horse has bolted?

In introducing the proposals, Bill Shorten used an example of an extreme franking credit refund of $2.5m to a single SMSF in the 2014-15 financial year. This example is now well out of date and passed it’s used by date. The current government has introduced a $1.6m per person cap on pension phase superannuation which we estimate halves the problem. Perhaps a better way to eliminate the few extremely large franking credit refunds would be to either limit the total amount people can invest into super (not just the amount in pension phase) or limit the maximum franking credit refund per person. Let’s not make just about everyone’s retirement tougher because a few individuals have managed to take full advantage of the system.

Other Impacts

There are other impacts likely to arise from this change should it ever come to pass. Whilst members of defined benefit superannuation funds may not be directly impacted, the organizations’ that underwrite those benefits may need to increase their funding if the expected pension phase investment return assumptions are reduced. Banks and insurance companies may need to reconsider their capital positions in light of the potential impact of these changes on income securities.

Pension fund trustees may need to alter asset allocations. Some might argue that reducing exposure to the very concentrated Australian share market might be a good thing, but it will very much depend on where the money goes to. As well as Australian shares, SMSFs have a strong preference for Australian property, and we are not so sure allocating more money to a fairly expensive domestic property market is necessarily a good thing. Increasing exposure to global shares makes more sense, particularly since SMSF seem under-allocated to global shares compared with industry and retail fund allocations.

We also believe that any changes will likely impact the financial advice that investors receive, particularly investors in mature SMSFs.

Value of financial advice

Tax changes provide financial advisors and tax professionals the opportunity to add value for their clients. Pension phase SMSFs might likely restructure in a number of ways. They could move their pension assets into growing industry or retail funds to continue to receive the effective value of franking. Or they could look to “grow” their own SMSF, by adding say their children who are in accumulation phase as members, but there are constraints to this within the current SMSF rules.

Sadly, the 610,000 lowest income earners who would be affected by this change are probably least able to seek advice and least able to restructure their assets.

Don’t act too soon

We also discourage people from acting too soon on this proposal. It is the policy of the opposition. Not only do they have to win the next election, they would need to win over sufficient cross bench senators to make this change to the law. And even were it likely to happen, companies may act to flush out franking credits prior to any change coming into effect – buybacks and special dividends may come with a flurry in that case.


Overall, we don’t see this as good policy. It’s discriminatory. Whilst positioned as a “taking from the rich to give to the poor” policy, it’s actually 610,000 of the lowest earning individuals who will likely feel the most relative pain. It also discriminates between different types of superannuation funds, impacting the returns and fund balances of pension phase members of SMSFs, but not the returns and fund balances of pension phase members of growing funds such as many industry super funds. We also think that as the superannuation industry matures, and many more members of funds retire, these changes will likely impact members of many of the more mature government, industry, and retail super funds, not just SMSF members. If passed, this policy may become a ticking time bomb for many, many Australians.

Franking credits provide a very valuable increment to the income of all defined contribution retirees be they rich or less well off, as well as to very low income investors outside the super system, and surely we all hope to retire comfortably one day.

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Bob Cohen

Approximate $5000 a year impact? I'm not sure how "a retired couple with a $1m superannuation balance would be $5000 worse off each year". I'm one of them and I'll be $20000 worse off. Lets assume all our funds are invested incoys with franking credits. So $1M at say dividends of 5% = $50000 income and withthe attached franking credits (currently refunded to me ) another $21000 . Can you help me understand how I'd only loose $5000 if this law was inacted? Thanks

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David R Thomas

Without doubt the best article i have read on this subject. Presented in a clear and objective manner. Thank you David Thomas

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Melville Leslie

Thank you Dr. Hamson for a sensible take on a ridiculous situation thrown up up by a frightened opposition. Over 10 years I have taken steps encouraged or even enforced by previous governments to be self funded in my retirement reducing a need for a pension and now these bureaucrats want to move the goal posts on self funded retirees with total disregard for policy or fairness. Bring on the election I say and see how many locked on Labor voters find the key to change.

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Helen Gilbert

I am no fat cat and I will be impacted to the tune of $16k or thereabouts. Bill, keep bringing up the thoughtless and discriminatory policies and I hope you spend the rest of your political life on the opposition benches.

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Bob Jarvie

Mr Shorten and all other parliamentarians would still be able to enjoy the full benefits from imputation at the expense of low income earners. Is this Labour policy!

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Lloyd Gibbs

A good way to scare investors into higher Overseas Global Managed Funds. A good way to turn the Australian share market into a desert. Shareholders will be reluctant to take up rights issues which are necessary for companies to reduce debt and/or expand in many areas including the infrastructure we badly need. All of this will lead to Australian companies having to struggle, resulting in staff reductions. Good one Labour Bill!!

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Paul Ujj

Perhaps $5000 / year is an average across the board. Your particular situation may be towards worst case.

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richard dobosz

great article ,thank you

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richard dobosz

thank you ,, i am one of the people this will impact on ,,my beef is that super was to be something relatively stable and little need for changes ,,it has now become such that you need to be a active investor because both parties are guilty of changes ..The advice i am getting is spend ..spend ..spend and get funds down to level where you get Full Pension and top up with your own funds ,pensions equate to 7.8% return so why not spend up,,good health is more important..

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Ian Nicol

An excellent overview of the general impact however I look forward to Dr Hamson providing an update to the ASX and many SMSF's that have invested in the Plato LIC (PL8) .

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Dr Don Hamson

Hi Bob The $5,000 number was an average, assuming one held only around 30% of $1m in Australian shares. As stated investors like yourself with higher allocations to Australian shares would clearly be worse off. $21,000 in your case is a lot to lose and shows how unfair this proposal is. Don

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frank nichol

no more votes for you ALP. You have just shot yourself in the foot,as the baby boomers still have a large say on who has government,not you baby...bye bye

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Chris Bishop

The whole point of franking credits was to avoid double taxation for those who pay tax and something which seems to have been lost in this article. Why should those who pay income tax have to cover those with no income tax who get a franking credit refund?

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Gavin Smith

Great article. I am a self funded retiree holding my investments outside super. My total income consists of approximately $35000 dividends ( plus 15000 imputation credits) plus around $4000 bank interest. My net income after tax is currently around $43823. After Short Bill has his way it will be around $39000, or $4823 less, pretty much the average $5000 reduction mentioned in your article. I am no high value SMS. Collateral damage??

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Darrell Lantry

Policy to gain votes from the low income to unemployed telling them that the wealthy are getting wealthier just to win votes We are Mid income learners just trying to survive now while still working and this was part plan for retirement , so it is wrong Mr Shorten for us trying not to reply on hand outs ? Why run the risk of the markets we should blow the money now and live off the system latter This will lead to more people dependant on welfare and increase the cost of housing as money will move from the share market to housing Well Bill you get what you are after ! To be PM and to Govn what of your super package ?

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Frank Damico

Bill, shorten my retirement lifestyle, shorten my investment return, storten my children's inherentence. I paid full taxes all of my life and in retirement you still come looking for a handout. Storten by name, short in ideas.

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Dave Emmett

Why should those of us lucky enough to have worked, paid tax and accumulated significant assets (housing, super,..) be able to stop working, pay no further tax and, on top of this, receive payments from the ATO for excess franking credits while our younger people without assets get taxed on the very modest incomes they gain from working. I suggest the issue be looked at in the broader context of a fair go for all; young and old.

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Ian Callcott

The ALP proposal may be poor politics but it is not poor economics. Gareth Brown (Mar 19) should be read more carefully. Dividend imputation is intended to prevent double taxation of dividends. If the recipient of a dividend pays no tax there is no double taxation. To refund the tax paid by the company means no tax at all is paid on that part of its earnings. Why should the tax revenue that is foregone be handed out in this particular way?

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Trevor Ridgway

This policy is ideologically driven "class hatred" and so it does not need to make sense financially ! As long as the Socialist Left can claim that they are "soaking the rich" they feel good about themselves ! Robin Hood was NOT in the same category despite the media allusions that Shorten is "onto a good thing electorally". The media ( generally ) have been WRONG about most things lately and I think this is YET ANOTHER ONE. NOW , if "we" can knock the existing government into some sort of shape to make THEM re-electable it may well prove to be worth the effort as it will cut short Shorten's ambitions. Regards , Trevor Ridgway.

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Robert Goodwin

Agree totally with all the issues raised. Very discriminatory and unfair. We run our own SMSF and I know how much we will lose. I cannot believe that Labor think this is a "fair go" policy. We are no burden on the taxpayer, funding our own retirement, paying for our own health and other insurances. Labor dont look a gift horse in the mouth!

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Steve Martin

Thanks for this article Don! You have put fresh perspectives on the issue that are quite important. You have highlighted the unfairness and inequity of the proposal, can I just add that the proposal is also poor tax design because it departs from the principles of avoiding double taxation on company profits and taxing company profits at shareholder rates. I think the other elephant in the room is that the revenue estimates are fundamentally flawed. The estimates are based on 2014- 15 refunds, which of course was prior to the $1.6m cap on assets supporting account based pensions and secondly it assumes that someone who is taxable and has all or most of their investments in shares will not diversify to absorb otherwise unused credits. If you see a bus coming you step out of the way. All of this pain and ultimately no gain. There will not be a school or hospital in it.

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kent bermingham

You have missed the most important factor, I can have a home valued at 1.6 million and it is not taxed either, talk about discriminatory, how much is Bill Shortens home

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Ian Cowie

Thanks Don, a very useful analysis. Thus effectively no tax free threshold for SMSF retirees invested in shares. Could this see Australian companies putting less emphasis on paying dividends ala US companies?

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eric wells

I am more than a little annoyed, as a part pensioner, and part self funded retiree, to be depicted as the "big end of town" by Bill Shorten. My vote in the future will be for the Liberals, and I encourage all like me to do the same. Eric Wells

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Dean Tipping

One consequence of "Short-on-brain's" policy that hasn't been mentioned in despatches is those otherwise refundable franking credits will not be injected into the economy in the manner they have in the past by our low income earning retirees. How will this impact on small business who's products & services have been paid for by those franking credits that have been refunded up until this point in time? Sure, "Short-on-brain's" ideology is the "newly elected" Labour government will allocate those "confiscated" resources in a matter much better than our low income earning retirees can to which I would retort with Kerry Francis Bullmore Packer's outstanding reply at the media enquiry years ago with words to the effect; "as a government you're not doing a very good job of spending what you get now...why would I want to give you more?" If "Short-on-brain's" and "Bow-brainless" believe a couple receiving the full Age Pension with $300K invested in a SMSF or outside of the super system are wealthy they either or both; don't understand the mechanics of our tax system or are so far out of touch with how people fund their retirement, especially at the lower income end of the system, they are not fit to govern. They've deliberately (if you believe they know what they're doing) targeted the very people their party is supposed to stick up for. If you believe they don't know what they're doing, it's incredibly embarrassing they're going to whack those their party is supposed to stick up for and this my friends is VERY SCARY. Who knows what they're capable of if they get elected. The sad part is the majority of punters in society have no clue about this matter nor the ability to understand it if they're exposed to it.

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Shaun Baxter

The Labor policy reverts back to the original Keating imputation implementation, to prevent double taxation of dividends. Howard/Costello introduced the change to refund tax credits. This change is well overdue.

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Bob Fuller

Hi Dr Don !! Why can the multibillion dollar Future Fund owned by the federal Government pay no tax and yet receive franking credits ($817 million last year) whilst pensioners and others who pay no tax can't? Opposition leader Bill shorten and Chris Bowen said the other day that the non payment of franking credits did not apply to the Future Fund as they were needed to avoid the Commonwealth being unable to meet its target of meeting liabilities for its public servants pension entitlements. Why are they protected whilst ordinary workers are not? One rule for some and not for others? Is that your definition of fairness Bill? Bob Fuller.

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Troy Dawson

@Bob Cohen. You don't lose your franking credits unless you don't pay tax. So if your superannuation fund earns an income which is taxed then the franking credits are offset against the tax that would otherwise be payable, its only if you don't incur a tax liability that you will now lose your franking credits (which is fair why should an individual get a tax credit after paying no tax! ). Also you don't understand how tax liabilities are calculated. At $1m and dividends of 5% = $50,000. Assessable income is actually $50K + the franking credits so $71,000. If the super fund was in accumulation phase and had no other deductions for simplicity, the tax payable would be $71,000 X 15% or $10,650 less franking credits ($21K available) so tax liability is $0 in proposed legislation. Currently in this scenario you would receive a refund of $10,350 so your loss is $10,350 compared to current legislation. If your million dollar fund is in pension phase then no tax is ever payable anyway so franking credits will be lost. There is no double taxation as is claimed no tax is paid so no tax is provided.

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Those arguing that a refund of franking credits means that no tax is paid on that income at all are semantically correct and factually wrong. Tax is paid, if and as required at the marginal tax rate of the recipient, based on the progressive income tax tiers. This is true of income received from other structures such as trusts, and for other investments such as term deposits. Why should I be able to earn interest on 600K+ in cash and pay no tax, yet have to pay a flat 30% on fully franked dividends received from a 200k share portfolio? TFN witholding tax deducted is returned if appropriate based on your marginal tax rate. PAYG installments for small businesses are adjusted at EOFY based on your marginal tax rate. If your individual tax rate happens to be zero by virtue of arguably excessively generous decisions made years ago, that is where the problem lies and where a sound policy proposal would be focused. This proposed policy is politically motivated and does not solve the actual problem. Indeed it will likely make it more difficult to make the needed changes ever happen. I have no time for bad policy, irrespective of who it comes from. Bill Shorten and Chris Bowen may or may not understand the full implications of their proposal. Either scenario is disappointing and more than a little concerning.

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Fred Woollard

This is self-serving nonsense from a fund manager trying to look after the interests of his clients and himself. Franking credit refunds were introduced by John Howard during the mining boom as a reward to rich old people, part of the Liberal Party's base. Sadly, that boom is now long gone. If elected, the Shorten government will need to make hard decisions about the large debt and deficits it will inherit. The question about franking credit refunds should be thought of as the following question: Should the government spend $5bn a year on: a) Government services like health, education or defence or b) Reducing the deficit (Liberals don't talk about that anymore) or c) Gifting the money to a small group of mostly old rich people to make them even richer. I suspect that if the question was put like that, most people, especially the more than 90% who aren't affected, would regard either (a) or (b) as far better than (c). The government and Dr Hamson argue that Shorten's proposal is unfair because many recipients of franking refunds are low income earners. This is highly misleading because the whole point of franking credits for many old people is to reduce one's taxable income toward zero even if one has a large superannuation balance. It also ignores the question of whether "welfare" money should be targeted at wealthy people who have managed to reduce their taxable incomes toward zero, or to genuinely poor old people with little or no assets. As a fund manager myself, I recognise that these comments won't be popular in this forum. Nevertheless, I feel obliged to speak uncomfortable truths.

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Trevor Ridgway

In reply to Fred Woollard 's comment of 23/03/2018. How glad I am that I don't have any funds invested with you ! Your 'so called' argument is based on a lie. All companies pay company tax IF they are successful and earn enough . The company profit can be paid out as dividends to their shareholders in varying amounts , some can be retained to fund future growth , and so the dividend may be "fully franked" or "partly franked " . Assuming that the INVESTOR ( shareholder ) has taken NO RISK is totally false. The Government , who HAS taken NO RISK gets to collect up to 30 % of the company's profits as 'company tax' BEFORE the dividends are paid out. That means that the DIVIDENDS are "TAX PAID" in the hands of the shareholder. The 'dividend imputation ( franking credits) are an acknowledgement the TAX HAS BEEN PAID and that to avoid being taxed again an adjustment is allowed. To NOT ALLOW the REFUND OF THE TAX CREDIT to the shareholder ( regardless of their income or age ) would be tantamount to THEFT ! As the COMPANY TAX has already been collected {and is theoretically sitting in the Government coffers } and as it BELONGS TO THE SHAREHOLDER by virtue of the "franking credit" then it becomes REVENUE NEUTRAL as it is simply being returned to it's rightful owner......the investor WHO TOOK THE RISK of the investment in the first place . Without THAT INVESTMENT there would have been no company and no profit and no jobs ALL PAYING TAXES. What an ungrateful Government THAT would be ! Now YOU are advocating for the LABOR PARTY which got us into this financial mess in the first place !!?? In your distorted view of the world you would have us all "piddling in our own waterhole". I condemn your view !

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Mark Stueve

Mr Woollard it is disappointing to read comments. Dr Don Hansom article is clear on the matter he is discussing you seem to be making all sorts of leaps. Class and Age– “Reward old rich people”? Voters political preferences parties if they have some capital? “The boom is over and now someone has to pay” – so it needs to be members of our community that received franking credits? Labor will have to make hard choices – hmm look at political economic history? Ceasing franking credit refunds will pay for Labor’s spending to the tune of $5 billion a year – or 5 billion will be removed from other people’s wallets to pay for the political parties. Labor will use it to reduce the deficit? really Mr Woollard I will share some truth for you Mr Woollard. I looked after my elderly parent’s finances for many years. They were not wealthy, my father retired from working at Holden’s for over 30 years as a Toolmaker. Of course, he didn’t not have a large amount of capital upon retirement 50K (no 9% super back then), but our family was honest, frugal and hardworking. They believed in strong work ethic and the freedoms of this country. As a family we saved where we could, and mother certainly could stretch a dollar) Upon his retirement I encouraged him to invest in some Australian companies, over time their franking credits meant so many things to them. One being a part owner of an Australian company that paid its tax, then passed those earnings onto the owners. His investing style was to stay in his own back yard – a Peter Lynch (do you know him) approach to investing. So, there was no smart financial engineering or the taking on hidden hedge fund risks, and no expensive fund management fees. I knew many people in their retirement village and I didn’t see lots of rich people, just decent, hard working people that raised their families and wanted to enjoy their health and what time left to them on this earth. I saw how much that extra 2 to 3 k meant to them and others in the retirement village, they had the odd meal out at the local shopping mall, could afford to pay for the daily paper and their out of cost medical supplies if all was well and the odd Christmas present to their grandchildren.

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P Malone

Note to FRED WOOLLARD - Fred, I just love the implicit ageism in your comment; "old" gets a couple of mentions, and the clear implication is that you mean "less worthy" - especially if the old happen to be supposedly rich! (ie, have worked bloody hard and paid tax on the their super contributions AND accumulation stage earnings - we are one of the few countries to do this.). Fred, rather than deal with the content of the Don's article, you ignore it it, and slag off at old people. You also have a shot at Don as self-serving - an approach known as an ad hominem, and piss weak - whether it is in Latin or English (translate as "attack the man"). Nice one mate!

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eric wells

A superb article, right on the marke. I am a part pensioner, part self funded retiree, and your article fits me perfectly. Bill Shorten thinks I am rich. Love to see him fund his current lifestyle onmy income. The cash franking credits I receive are a welcome boost. All hands to the pump fellow pensioners and self funded rerirees, vote Liberal, or Bill will rob you blind. Cheers, Eric Wells

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Frank Damico

The whole idea for super was to provide a soft landing for retires and reduce the burden on the public purse by minimizing/ cutting ongoing pension payments. Politicians are now butchering this policy with yearly charges to the determinant of taxpayers who locked away their entire savings into minefield of backflips i.e. balance & transfer caps, limits on concessional & non-concessional contribution, salary sacrifice limits, bring-forward & TTR rulings etc. What was once a goose that laid the golden nest egg has become a turkey approaching thanksgiving. Thanks Bill!

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Adrian Webb

the clearest analysis I have seen. It is difficult to believe that the ALP could contemplate such a poorly thought through policy. Full marks to the Government in their responses in question time today!

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John Griffith

Why has there been no talk of "cash refunds" significantly bigger brother, the "tax-offset" of franking credits against current tax. It is purely semantics to say that a SMSF may not pay tax, therefore the dividend-paying company effectively also pay no tax on the SMSF's dividend. If the same shares were owned by a Pty Ltd Coy which earned profits in excess of their FC's they would get a tax offset against their tax bill - which would also mean the dividend-paying company effectively would also pay no tax on the Pty Ltd Coy's dividend either. Even if the Pty Ltd Co made a loss and paid no tax anyway, the franking credit can be converted to a carried forward loss, meaning that effectively the tax-offset is available for future years. When you look into the existing imputation system there is no convincing case to change just cash refunds side. It costs the budget no more to give a $1 cash discount than it does to give a $1 tax-offset. Either way it is $ 1. And in both cases it is paid from the taxes paid by the dividend- paying company and does not impact on taxes paid by other-tax payers. Of course you can mount an argument along the lines that "if cash refunds were not given we would save money". You could say the same thing about tax-offsets. The Government could save money if it reneged many things. Let's face it, Labor have isolated a group they don't care about and who likely don't vote Labor anyway. My concern is why the media and astute enough to ask what is so different between cash-discounts and tax-offsets? And it can have nothing to do with the tax-free status of some SMSF's. It just makes NO difference.

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