Govt to examine implications of scrapping franking credits

The House of Representatives Standing Committee on Economics on Wednesday announced an inquiry into the implications of removing refundable franking credits.

The committee’s chair, Tim Wilson MP, said there has been “legitimate community concern” about proposals to remove cash refunds for the full allocation of credits for individuals and super funds, and that it amounts to a tax on the savings of retirees.

“The ability for investors, including individuals and superannuation funds, to claim their full credits is an established feature of our tax system and is core to the financial security of retirees,” Wilson said.

“The committee is examining what impacts the removal of refundable franking credits would have, particularly on retirees who have made long-term retirement saving decisions based on their ability to claim refunds on their franking credits and whether it will compromise their financial security.”

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In a statement, Wilson said the committee will inquire into and report on the use of refundable franking credits, their benefits and the implications of their removal, including:

• analysis of who receives refundable franking credits, the opportunities it provides to offer alternative savings and investment vehicles to low and middle-income earners, and the impact it has on lowering tax bills;

• consideration of how refundable franking credits support tax principles, particularly implications for tax neutrality, removal of double taxation and fairness; and

• if refundable franking credits were to be removed, who it would impact and the implications from expected behavioural change by investors.

Submissions are being sought by 2 November 2018 although submissions will be received throughout the inquiry, Wilson said.