Actuarial research house, Rice Warner has labelled the Australian Labor Party’s (ALP’s) dividend imputation policy changes as remaining bad policy despite refinements.
It said that it was “extraordinarily bad” policy for six reasons:
- It is product-specific, attacking self-managed superannuation funds (SMSFs) but no other types of superannuation funds;
- Additional revenue figures have been bandied around based on out-of-date data, which does not take into account the major tax changes which took effect from 1 July, 2017 and mean that retirees with larger balances (broadly those with over $1.6 million in super) already face reduced franking credit refunds or an increase in their tax bill;
- It is easily avoided by a change in asset-allocation, or by partial or full transfer into an Australian Prudential Regulation Authority (APRA) fund, so it will not deliver much of the tax claimed;
- It signals that retirees should shift away from Australian shares to less appropriate assets, weakening our domestic capital market (SMSFs hold more than 12 per cent of listed Australian shares);
- It further weakens confidence in the stability of Government policy towards superannuation – even those not directly affected may experience reduced confidence that saving extra for retirement will be rewarded.
The analysis said Rice Warner expected that other forms of growth assets such as infrastructure trusts, Real Estate Investment Trusts (REITS) and syndicated property would become more popular and more overseas listed shares would be bought in place of Australian companies.
The Rice Warner analysis noted that the proposed change came on top of the 2016 Budget changes which curbed the concessions for higher earners.
“We accept that there are still many members of SMSFs with very large balances (which Labor ignored when it did its comprehensive review of superannuation). If it is deemed that they need to pay more tax, there is a relatively simple solution. Simply have a limit on the total amount allowed to be held in superannuation at retirement,” the analysis said.
“At (say) age 65, limit an individual to (say) $3.2 million in total pension and accumulation and make them withdraw the excess (tax-free). Then, returns on the assets will be taxed in their personal return like any other investment.”