Labor’s proposal to scrap franking credit cash rebates has been one of the most divisive and important topics of debate for Livewire readers. Earlier this week Geoff Wilson AO, Chairman of Wilson Asset Management, made his case for preserving the existing system. Here are the key points delivered in his speech that drew on data from 25,000 signatories opposing Labor's policy.  

On protecting the current dividend imputation system 

Wilson argues that the current system, established in 1987 by the Hawke Government and improved in 2001, is fair, equitable and enables:  

  1. Robust capital formation. 
  2. Efficient capital distribution.
  3. A more stable economy with reduced cyclicality. 

“Dividend imputation leads to efficient capital allocation by directing capital towards Australian companies. Dividend imputation encourages Australian companies to invest in Australian projects as franking credits are not earnt on foreign income. Increased local investment is a boon for Australian workers, the Australian Tax Office and Australian shareholders.” 

On reducing leverage in corporate Australia 

Wilson drew on research from Goldman Sachs to make his case that the current system has provided a defence against debt-related systemic risks in the financial system. 

“In lowering the costs of equity relative to debt, dividend imputation limits the imperative for companies to gear. As a result, Australian companies have relatively low levels of gearing compared to other countries.” 

“Leverage exacerbates the cyclicality of financial markets as it drives companies’ performance during bull markets and exaggerates companies’ losses during financial downturns.” 

“Goldman Sachs Investment Research found that Australia has the lowest level of gearing when adjusted for its sector mix.” 

We believe dividend imputation has significantly benefitted Australia’s financial system and contributed to the fact that Australia has not experienced a recession in 26 years. 

On giving a voice to retail investors  

Wilson Asset Management have collected signatures from over 25,000 Australian investors. A poll of this group revealed the following stats: 

  • Approximately 70% earn $90,000 or less per annum.  
  • Each year, almost 85% would lose up to $30,000 year and nearly 15% would lose more than $30,000.
  • More than half would be forced to reduce their family’s living standard and quality of life.
  • Almost a third plan to spend their financial assets in order to receive the Age Pension. 

“In markets and in politics, retail investors are often overlooked, and their voices are rarely heard. We have heard thousands of individual stories about how Labor’s planned changes to the dividend imputation system will devastate people’s lives.”

Labor’s policies will not only significantly impact retirees and low-income earners, but they will destroy the aspirations of a generation of young Australians. 

On poor policy and worse timing 

Wilson threw his support behind a proposed moratorium on changes to the superannuation system.  

“Independent MP Kerryn Phelps has introduced the very sound idea of a moratorium on changes to the superannuation system, given people need certainty to plan for their retirement and future."

I believe that a large part of Phelps’ success in Wentworth was driven by her overt support for the current dividend imputation system. 

Wilson drew parallels between Labor’s Minerals Resources Rent Tax proposed by the Rudd government in 2012. He argued that the proposed policy would amplify the effects of a looming bear market.

“Labor’s attack on the equity market in the final period of a record bull market resemble the Rudd Government’s Minerals Resource Rent Tax in the dying days of the mining boom – poor policy and worse timing.” 

“Bear markets are extremely painful, and we expect the negative effects of the looming bear market will be significantly worse if Labor wins office and introduces their draconian policies.”

Listen to the full speech below

Peter A

The question that doesn't seem to be addressed here is whether the current rules around franking credit cash rebates are really sustainable over the long term. Already, a large number of investors are receiving tens of thousands of dollars a year from franking credit rebates -as is noted in the article- and realistically, you have to wonder how long the current system will remain viable. I agree that aspects of the proposed Labor changes go too far, but system as it currently stands seems too generous.

michael cook

Michael C. Oct 31,2018 The current gov't clearly missed an opportunity to spell out to the Wentworth electorate the implications of doing away with cash refunds for imputation credits. As we all know the present breed of politicians are unable to make any decisions without testing the popular vote first and even then they manage to stuff it up. These stories outlined by you ideally need to be read out in parliament to alert the public of the impacts and to put some real pressure on both sides of politics to get some action. We need to get some local Federal politicians to take this up before its too late.

Laurence Dodd

The credits are income earned from the investment and belong to the investor. Only low income earners are eligible for refunds. Why force these people to become even lower income earners?

Scott O'Ryan-Roeder

In economic terms very few people are affected and as originally designed the imputation credit was offset against other taxes. The superannuation system is skewed to the relatively wealthy and is a freebie (tax concession) given to some by the government; as more people retire it's difficult to see how this can be sustained. Note whatever the government does there is a cost either as tax foregone now or pay benefits later As the company tax rate is lowered the imputation credit will become smaller is Wilson advocating to keep the higher tax rate as well?


Full credit to Phelps for taking a position that allows time to consider what changes may be necessary to enable the Australian superannuation system to be a world leading product. If Phelps is able to gain support of ALL crossbench members to push for a moratorium my vote would move to an independent candidate at the next election. In another article this week I learnt p f the very small position the Future Fund has in Australian equities. In a case where Costello established the future fund to fund the superannuation payments of those in public employ, the fund has less then 10% invested in the ASX listed equities.

Errol Kelly

Peter A.............You seem to be asserting that the system is unsustainable only in respect of those who currently pay no income tax by virtue of their circumstances (eg. retirees over 60 years of age (like me) who receive benefits from a taxed super fund and who are endeavouring to stay off the public teat). At the end of the day, the franking credits scheme was invoked as a vehicle to return to shareholders their portion of already collected company taxes. It is returned to some shareholders as an offset to personal taxation (a cash equivalent), and to some as real cash. If, as you assert, the system is too generous, then why is it not too generous in toto and not just for those who circumstantially are not liable for personal income taxation. What you (and Labour) seem to be advocating is blatantly discriminatory. Errol K.

Lyn Wells

I thank Geoff Wilson for speaking out on this potentially devastating blow to older Australians. We are feeling very very anxious about the brewing storm with the potential loss of nearly30% of our retirement income. Shame on the Labor Party for picking on old people. Elder financial abuse is obviously something Labor promotes. Lyn Wells

Richard Meyers

Chris Bowen has defended his policy as a revenue raising measure and challenged Geoff Wilson to come up with other ways of raising the "$6 billion" forecast income from denying franking credit rebates. Firstly, who else in the general population is being asked to take a 15% pay cut in perpetuity? Imagine a policy that mandated a 15% pay cut for wage and salary earners. It would never see the light of day. Secondly, the $6 billion can be raised by enforcing existing tax regulations. Rather than the soft target of retirees who have played by the rules to get to an independent retirement, why not go after those who don't play by the rules? The black economy is estimated to be in the order of $32 billion pa according to KPMG. There is the source of your $6 billion Mr Bowen. Thirdly - here is a certain outcome of this deeply flawed policy: retirees who will lose $10-15,000 pa if they remain in franked shares will look for sources of unfranked income at a similar level. They will be prime targets for a raft of mezzanine property funds, hedge funds they don't understand and other high risk investments. When this ends in tears, the resultant lost capital losses will now move these self-funded retirees onto the public pension - blowing a gaping hole in the expected $6 billion income forecast. What Mr Bowen will no doubt call an "unintended consequence".

Jeff Wecker

My local Labor Member replied to my email of concern over this policy with a proforma email, in which it said that "the policy it targeted at "VERY HIGH WEALTH INDIVIDUALS". I called their office and asked for clarification, and it turns out that Labor do not have a definition of what a Very High Wealth Individual actually is. So let's put the Shadow Treasurer on the spot and ask him what that means!!

Ali Stephens

I too congratulate Geoff Wilson, I am one of those SFR who will lose $30000, & I am not eligle for the aged pension, we would have to change our investing from 100% AU shares, into riskier investments.. the franking credits allow us to live out our lives as we intended to when we sacrificed in order to save for a comfortable retirement. I urge all your readers to go onto the Wilson site & sign the petition that they have set up. Cheers Ali💕

Lorraine Mercer

It seems the mistake I made was to save my money to arrive at retirement as a SFRetiree. I look at some of my friends who squandered their money having a good time and arriving at retirement with little or nothing, to be cared for by the government with a full pension and access to a nursing home in old age. More fool me! There is a lot of money tied up in SMSFs that the Labor govt want to squander on our behalf one way or another. Go Geoff.!

Simon R

"...the franking credits scheme was invoked as a vehicle to return to shareholders their portion of already collected company taxes." Errol, this is not accurate. The purpose of dividend imputation is to avoid the double taxation of company profits. E.g. Company A pays tax on their net profit and then distributes the leftover to shareholders, who also pay tax on this income. Franking credits offset this double taxation. If a shareholder did not pay any tax then there is no economic justification for them to receive the franking credits. The current rules are a taxpayer sponsored handout to retirees and low income earners. Its ok to argue that we should continue with this, same as it is ok to argue for other government welfare programs, but it needs to be acknowledged for what it is.

Geoff Larsen

@ PETER A. Sustainable? Why descriminate against those that have a low taxable income who receive franked dividends? The current policy returns so called "excess" franking credits in cash. If it isn't returned, as is Labor's policy, those for example on a 0% marginal tax rate (which includes non seniors with a taxable income of < ~$18,200) are effectively taxed @ 30%, the company tax prepaid, on the dividend taxable value. This is equivalent to the 19% taxpayer being taxed @ 49%.; the 32.5% taxpayer being taxed @ 52.5%.; the 37..5% taxpayer being taxed @ 67.5% & the 45% taxpayer being taxed @ 75%. In respect of the issue of sustainability a little thought on this leads readily to the conclusion that there is zero difference to the ATO revenue if the franking credit is returned as cash or if it is used to reduce the tax payable for higher income shareholders.

Ron Van aken

And now, what Robin Hood Shorten is taking from retirees, he wants to give to the dole bludgers

Errol Kelly

Just had a chance over lunch to listen to your speech Geoff. Thanks and well done....and obviously from the heart. It disturbs me that you have to take on Shorten and Bowen on behalf of the "not so well off" while our Liberal politicians continue to sit on their hands on this issue. I have already written to my local MP (Liberal) and expressed my dismay at Labor's proposal and he has decided to run a discussion group on the issue in a few weeks "to better understand the negative impact of this policy". Let's hope it's not too little too late. Regards.

john lacey

What has not been said is that the govt has already acted to stop high wealth funds to have Self funded super greater than 1.6Mill John L


In my view, Labours imputation policy is really designed to push all SMSFs (which will be severely impacted) into industry super funds (which won't). It's impossible to believe that Shorten is so stupid that he thinks people will simply stand by and watch 30% of their earnings disappear, whilst the industry super funds will still be able to hang on to every cent. Such a discriminatory policy is clearly targeted at the SMSF sector in order to help his union mates, and deserves the full contempt of the electorate. With many getting extremely frustrated with the continued changes affecting retirement planning, it's no surprise that independents such as Kerryn Phelps are gaining support at such a rapid pace!

Martyn Rose

Maybe they should consider having a limit on earnings where above that level you are not entitled to a franking credit rebate. Maybe scale it, so you only get a 75% rebate at $X and as you earn more it scales down. That way the average person (not sure what that is by the way) who rely on the franking credits to live and who spend the rebate in the economy are not affected.

Steven Andrews

Errol, the Dividend Imputation franking credits scheme was initially implemented to stop double taxation, not as a top-up for shareholders not paying tax. John Howard brought in the scheme to benefit these people by basically taking the company tax that would have gone into government revenue and directing it to those shareholders who aren’t paying any tax. In essence it is a pension for (a group of) people with a share portfolio, so in actuality these people are on the public teat. There are 2 main reasons I don’t like this scheme implemented by Howard. 1 – there are people with portfolios who have earnings over $80k and still get this government payment/pension and 2 – what about people who don’t have a share portfolio, perhaps they have a housing portfolio or nothing? I don’t think this is fair! Obviously people on the margins may be worse off and these situations need to be assessed and addressed and how Labor do this will determine how they are judged. How about some real super reform across the board done properly?

Ian Aston

One thing that most have ignored is that any retiree over the taxable income of $37,000 will be paying tax of 4.5% tax (including medicare levy) on the franking credit applicable to any additional dividends and those "privileged few" self funded retirees with a taxable income over $90,000 will be paying 9% on the franking credit for additional dividends.. Also have in mind, the tax department adds your cash dividend income and your franking credit together to arrive at the "taxable income". i.e. $21,143 dividends plus $15,857 equals $37,000. (Remove the franking and you are back to the equivalent of the age pension). The net effect of denying franking credit refunds will push many onto the public purse. Ian A


Peter A- Thumbs up to Errol Kelly's comment and to everyone else who has commented so far. Hope you read them all.

Michael Grau-Veliz

Geoff, You forgot to add “working families” and that Labor will take ALL your dividends and destroy the economy! Think of the retail investors!! As more astute readers have said, if you want to push your case for further corporate welfare get a younger person to sell your message. Unfortunately the way you’re selling it at the moment you come across as a millionaire boomer asking for more handouts. If you're worried about the volatility of returns due to leveraging maybe investing in an absolute return fund might help alleviate your concerns.

Jane Abbott

I’ve just read all these comments, and it is obvious some people out there just do not have an understanding how our taxation system operates. It is a bit concerning that younger people are under the impression that self funded retirees are taking advantage of the ATO. Yet all the explanations here won’t change their ideas. We do not rip off the ATO. we do not want to have an Aged Pension, which works out to be more than $650,000 plus benefits CPI Indexed in a couples lifetime. If we were a wage earner under this proposed policy we could be better off, but we are now too old to be a wage earner to make up the 30% loss of income that will occur under Labor’s policy. The Parliamentary Enquiry into Franking Credits, read some of the submissions, than you might understand the personal impacts this targeted proposed policy impacts. Quite upsetting really.

Brian Bruton

Personally I think the fundamental problem is that retirement pensions are tax exempt, based - from a failing memory - on the final generosity of Peter Costello. You can hardly blame people for arranging their affairs to make full use of the system. It would be preferable to tax income on the same gross basis, whether from earned income, dividends, interest, unit trust distributions, etc. This means retaining the addback of franking credits but introducing a sliding tax scale (and other possible concessions) that the Govt of the day thinks appropriate. I recall reading an article from Scott Phillips (editor of an advisory service) that deals with this issue very well. (An alternative is to firstly tax all current UnFr income - eg interest, unfranked dividends, rent, trust distributions, overseas divs etc at 30% - it puts everything on the same playing field. See how this goes down with the voting public !! )

John Kimber

As an Australian US licensed investment analyst working in the USA the contrast with Australian tax laws is stark. US dividends are taxed at 20 per cent and distributions from retirement funds are mostly taxable. Franking encourages companies to pay more tax, not less abd explains the astronomically high payout ratios in Australia. I have been looked at in disbelief by US investors when I try to explain the obsession with fully franked dividends.. Australians need to remember the irony that franking was introduced to curb investment in property.

Nathan Thomas

In the interests of the Federal budget franking needs to change. Let’s stop focusing on what’s in it for me and start thinking of what’s best for the community.