Labor’s much-debated proposed franking credits reforms are “flawed, inequitable and fail to meet the policy intent of improving the integrity of dividend imputation for all tax payers”, according to a submission from the SMSF Association to the Standing Committee on Economics.
The submission said that the proposals undermined the intention of the imputation system to avoid excess taxation by ensuring that dividend income is taxed at a shareholder’s marginal tax rate, making it akin to a sole proprietor who earns the same net profit.
It also slammed the proposal as inequitable to the self-managed superannuation fund (SMSF) sector and individuals in or approaching retirement, saying that individuals in the retirement phase who have a nil tax rate would lose 30 per cent of their share income.
While Labor has said that the proposal will target the wealthiest 10 per cent of SMSFs, which would presumably make voters unsympathetic to calls of inequity, the Association said that this is inaccurate in light of the $1.6 million transfer balance cap.
“All the evidence suggests this proposal is a quick grab for revenue without considering the long-term financial consequences for many Australians who do not deserve the ‘wealthy’ tag, having prudently saved to be self-sufficient in retirement,” SMSF Association chief executive, John Maroney, said when commenting on the submission.
“If Labor believes that franking credits should only be claimed from those individuals who pay tax, then the policy should be designed to ensure refunds to all individuals who pay no tax are removed, not only those individuals who choose to utilise an SMSF or some low-income earners who hold shares.”