The Financial Services Council says, that changes around Labor's franking credit, will affect around 2.6 million people in large superannuation funds. Denying few retirees, a cash refund at tax time, labor will make excess franking credits non-refundable if they are elected.
From those with self-managed super funds anger over the policy has originated largely and while some observers have claimed that non-SMSFs will not suffer, the FSC claims compared than any other group more people in large regular funds will be affected.
In a report submitted to a parliamentary inquiry investigating Labor's proposal, the FSC says, to large super funds in 2015-2016 refunds were worth $235 million, with almost 50 funds receiving refunds. Up to 2.6 million Australians benefited from these refunds as there were 2.6 million accounts in these funds.
As those retained by the Big Four banks, the FSC, which represents retail funds, to offer information about franking credit refunds was asked by 14-member funds. 66,000 accounts owned by retirees, and average benefits for those members as respondents identified, was of $850 a year.
From refunds worth more than 30 basis points, or 0.3 percent, each, approximately 33,000 accounts benefited. The FSC says in a submission to a parliamentary inquiry examining Labor's proposal, an increase in yearly super returns of 0.3 percent, for a typical full-time worker over a 46-year working life would boost retirement savings by $55,000 or 6.6 percent.
Among those who will be worse off, are people with low balances. The submission says ‘where the average member balance is below $100,000, there are 73,000-member accounts in surveyed funds. The average benefit of franking credit refunds is $195 per member or 26 basis points, across all members of these funds, which is 0.26 percent.
Labor's policy would have no or little impact on the super of most Australians, spokesman for the shadow treasurer, said Chris Bowen. Investors will still be able to use franking credits to offset their tax bills, under Labor's proposed changes to dividend imputation. For those who fund their retirement principally using a share portfolio or have an SMSF i.e. people on low and zero rates of tax will not get cash refunds any longer.
To increase government revenue by $10 billion in the first two years of operation the change will hit the wealthiest retirees as quoted by labor. For the interest of budget responsibility, it's a $5 billion-a-year incongruity that must be fixed.
Shadow treasurer Chris Bowen wrote ‘as envisaged by Paul Keating, labor will return dividend imputation to its original design. For corporate tax paid to shareholders Australia is the only country in the world which provides a refund if they don't pay income tax.
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