Abbott/Liberal Govt Watch

[Q.]

:shock: And tax everyone at 60% because the government are better at managing our money than we are? Why do you always want higher taxation?

I'm suggesting that the system be altered - changing the rates or taxable proportions of dividends. Or lowering the corporate tax rate etc.

The UK changed their system purely to discourage high dividend payouts.

[Jimmy_041]

:shock: And tax everyone at 60% because the government are better at managing our money than we are? Why do you always want higher taxation?



And you keep either missing, or avoiding, the point that Trader, and I, are making. Why should an SMSF not get the same treatment as everyone else in traditional super funds? The policy is flawed because it targets one group of people and it’s not rich people. Absolute garbage. Why haven’t they proposed cutting it out for everyone? You can have >$1m in you Hostplus account and still get it but not if you have $500k in your SMSF. Cut it out for everyone if it’s such a stupid idea. But they can’t. Why not? Because the unions, who leach off the industry funds, won’t let them.

Because pooled super funds have so many members still paying tax that they can still make full use of all franking credits.

That's actually a false argument, made for political purposes by Labor, to defend the fact that they have to favour their mates.
Not all of the members are still paying tax but they keep the benefit as well.

IF, the granting of excess credits is so bad, why don't you agree that they should cut it out for everyone? You suggest getting rid of the dividend imputation system altogether, so why can't you agree that getting rid of the excess credit part for all is therefore a good idea? Imagine the tax windfall Labor would have then!!

[Q.]

That's actually a false argument, made for political purposes by Labor, to defend the fact that they have to favour their mates.
Not all of the members are still paying tax but they keep the benefit as well.

IF, the granting of excess credits is so bad, why don't you agree that they should cut it out for everyone? You suggest getting rid of the dividend imputation system altogether, so why can't you agree that getting rid of the excess credit part for all is therefore a good idea? Imagine the tax windfall Labor would have then!!

Some pooled super funds and members of those funds may be disadvantaged by the policy as well.

I agree with you on the last point, get rid of the excess credit part altogether:

[Jimmy_041]

That's actually a false argument, made for political purposes by Labor, to defend the fact that they have to favour their mates.
Not all of the members are still paying tax but they keep the benefit as well.

IF, the granting of excess credits is so bad, why don't you agree that they should cut it out for everyone? You suggest getting rid of the dividend imputation system altogether, so why can't you agree that getting rid of the excess credit part for all is therefore a good idea? Imagine the tax windfall Labor would have then!!

Some pooled super funds and members of those funds may be disadvantaged by the policy as well.

I agree with you on the last point, get rid of the excess credit part altogether:

I'm not sure what that chart shows. 51.2% of franking credits go to people under $180k
Of course the higher the salary the more the disposable income to invest.
There is actually nothing wrong with people earning higher salaries. Everyone wants to - including you.

At least we agree that excess credits should be banned altogether IF they are to do anything at all.
As I, and other commentators, have said; they wont do it because their union mates wont let them.
So, SMSF retirees suffer for the good of the union movement. And who in the union movement benefits the most?
The ones at the top - the ones proposing policies such as this. They always win. But to keep at the top, they have to be at the beck and call of the next in line to get their faces into the trough.

[Q.]

That's actually a false argument, made for political purposes by Labor, to defend the fact that they have to favour their mates.
Not all of the members are still paying tax but they keep the benefit as well.

IF, the granting of excess credits is so bad, why don't you agree that they should cut it out for everyone? You suggest getting rid of the dividend imputation system altogether, so why can't you agree that getting rid of the excess credit part for all is therefore a good idea? Imagine the tax windfall Labor would have then!!

Some pooled super funds and members of those funds may be disadvantaged by the policy as well.

I agree with you on the last point, get rid of the excess credit part altogether:

I'm not sure what that chart shows. 51.2% of franking credits go to people under $180k
Of course the higher the salary the more the disposable income to invest.
There is actually nothing wrong with people earning higher salaries. Everyone wants to - including you.

At least we agree that excess credits should be banned altogether IF they are to do anything at all.
As I, and other commentators, have said; they wont do it because their union mates wont let them.
So, SMSF retirees suffer for the good of the union movement. And who in the union movement benefits the most?
The ones at the top - the ones proposing policies such as this. They always win. But to keep at the top, they have to be at the beck and call of the next in line to get their faces into the trough.

Most of the other 50% are retirees who pay no tax. I'm suggesting that if you remove the excess credit for everyone, then you remove a government handout for high income earners who clearly don't need a government handout.

[Q.]

In other news, our mate Pyne set to quit before the election.

[Jimmy_041]

In other news, our mate Pyne set to quit before the election.

Far out! Just when I had a chance to vote for someone else I change electorates

[Jimmy_041]

That's actually a false argument, made for political purposes by Labor, to defend the fact that they have to favour their mates.
Not all of the members are still paying tax but they keep the benefit as well.

IF, the granting of excess credits is so bad, why don't you agree that they should cut it out for everyone? You suggest getting rid of the dividend imputation system altogether, so why can't you agree that getting rid of the excess credit part for all is therefore a good idea? Imagine the tax windfall Labor would have then!!

Some pooled super funds and members of those funds may be disadvantaged by the policy as well.

I agree with you on the last point, get rid of the excess credit part altogether:

I'm not sure what that chart shows. 51.2% of franking credits go to people under $180k
Of course the higher the salary the more the disposable income to invest.
There is actually nothing wrong with people earning higher salaries. Everyone wants to - including you.

At least we agree that excess credits should be banned altogether IF they are to do anything at all.
As I, and other commentators, have said; they wont do it because their union mates wont let them.
So, SMSF retirees suffer for the good of the union movement. And who in the union movement benefits the most?
The ones at the top - the ones proposing policies such as this. They always win. But to keep at the top, they have to be at the beck and call of the next in line to get their faces into the trough.

Most of the other 50% are retirees who pay no tax. I'm suggesting that if you remove the excess credit for everyone, then you remove a government handout for high income earners who clearly don't need a government handout.

Have you got a source for that statement?
You aren't seriously stating that most of the people earning less than $180kpa don't have dividend paying shares

[tigerpie]

Pardon my ignorance but isnt this tax bill is aimed at those who don't pay tax, but are entitled to a refund?

[DOC]

Yes.

[tigerpie]

Yes.

I'm confused as to why some on here think this is OK.

If you don't pay tax then you don't get a refund.
Its not that difficult to understand or maybe I'm being to simplistic?

[DOC]

No.

[Jimmy_041]

Yes.

I'm confused as to why some on here think this is OK.

If you don't pay tax then you don't get a refund.
Its not that difficult to understand or maybe I'm being to simplistic?

It’s the way dividend imputation works.
Under the current system, you have, in fact, paid 30% tax via company tax.
So, if your actual tax rate is zero, you are, currently, entitled to that full 30% back.

[DOC]

The company has paid 30% tax (that is, a fully franked dividend) not the individual. The current system is allowing for individuals to claim tax back that they did not pay. It is an income and naturally people do not like to lose income, fair or otherwise.

When introduced (Paul Keating?), the intention was to stop double taxation, that is company tax and the relevant rate of the individual.The rebate is perfectly legal and is what Labor proposes to change.

Thus the objection by Labor (cites a hit to the budget of about $10 billion (I think) is that 30% paid by the company which is then refunded (albeit to a separate entity) means that no tax is paid which in their view is unfair.

It was good while it lasted for individuals, and sure as night follows day it will cease. Indirectly and directly I and my family have been beneficiaries. Like all things with money, there are ways around most things, there is always fraud and sometimes there are people who want change.

This will not be a simple change. It will alter the way in which companies pay dividends (Aus companies pay some of the highest dividends in the world) and will drive companies to build worth which will be reflected more so in the share price and not the dividend payment. There will be more activity around buying and selling of shares. The brokers will be happy!

Why then does the Govt not just make all companies pay their 30% tax , scrap the rebates and ease the admin burden?

Because companies can post a loss (pay no tax) and still pay a dividend out of reserves.

[Trader]

Yes.

I'm confused as to why some on here think this is OK.

If you don't pay tax then you don't get a refund.
Its not that difficult to understand or maybe I'm being to simplistic?

The current system is that the company pays 30%, then when the dividend is paid to the individual, there is a 'square up' between the individuals tax rate, and the 30% already paid by the company.

The person in the 0% bracket gets a full refund.
Someone in the 19c bracket gets 11c back.
Someone in the 45c bracket pays the additional 15c.

Labor are proposing to change this system.
To the person in the 0% bracket, they are saying sorry, the company tax rate applies.
To everyone else, we'll still apply your individual rate. (This includes giving credits back to the person in the 19c bracket).

For me that is where it isn't fair.
Either dividends are individuals, and EVERYONE should pay their personal rate (which means giving credits back to those in BOTH the 0% and 19% brackets), or dividends are company profits, and the company tax bracket (of 30%) applies, meaning those in higher brackets then shouldn't be hit with the 'top up' payments.

I don't really care which rule applies, but to apply different rules to different groups is unfair in my opinion.

[Jimmy_041]

Doc
Putting aside super for the moment.
So, the company tax rate is gradually coming down to 25%
The personal tax rate kicks in at $18,201 (19%)
For you to be non taxable, your direct ownership dividends have to be under $18,200? (ie) you will pay tax over $18,200 and deduct the imputation so get a refund of the difference up to $37,000 where the personal tax rate goes up to 32.5%
Correct?

[DOC]

Yes

Quoting Traders example above

The person in the 0% bracket gets a full refund.
Someone in the 19c bracket gets 11c back.
Someone in the 45c bracket pays the additional 15c.

And from CommSEC

Case study: James receives a tax refund

James owns shares in a company. The company pays him a fully franked dividend of $700. His dividend statement says there is a franking credit of $300. This represents the tax the company has already paid. This means the dividend, before company tax was deducted, would have been $1,000 ($700 + $300).

Come tax time, James must declare $1,000 (the $700 dividend plus the $300 franking credit) in his taxable income. If his marginal tax rate was 15%, he would have paid $150 tax on the dividend. Because the company has already paid $300 in tax, James will receive a refund of the difference, which is $150.

If James was in a higher tax bracket he may not have been entitled to a refund of any of the franking credit, he may even have to pay additional tax. However, if he is a low income earner, it is possible to be refunded the full amount of the franking credit.

[tigerpie]

On a different note, the rats are leaving the sinking ship at a rapid rate.
Bishop, Pyne.....whose next I wonder.

[Jimmy_041]

Yes

Quoting Traders example above

The person in the 0% bracket gets a full refund.
Someone in the 19c bracket gets 11c back.
Someone in the 45c bracket pays the additional 15c.

And from CommSEC

Case study: James receives a tax refund

James owns shares in a company. The company pays him a fully franked dividend of $700. His dividend statement says there is a franking credit of $300. This represents the tax the company has already paid. This means the dividend, before company tax was deducted, would have been $1,000 ($700 + $300).

Come tax time, James must declare $1,000 (the $700 dividend plus the $300 franking credit) in his taxable income. If his marginal tax rate was 15%, he would have paid $150 tax on the dividend. Because the company has already paid $300 in tax, James will receive a refund of the difference, which is $150.

If James was in a higher tax bracket he may not have been entitled to a refund of any of the franking credit, he may even have to pay additional tax. However, if he is a low income earner, it is possible to be refunded the full amount of the franking credit.

So, this change to the tax treatment of the excess credits will 100% affect those investors with shares providing total dividends up to $18,200, and partly up to $37,000 depending on the franking rate. It doesn't affect investors with a portfolio providing annual dividends higher than $37,000 who are in a higher tax bracket than the company tax.

The average dividend yield is 2.5% so to reach $18,200 in dividends, the average portfolio would have to be $728,000. Remembering this is outside super, that would probably affect all poor, struggling, emerging and the majority of middle class families?

So, how does it affect the rich and super rich who would have share portfolios over $728,000 and probably in the millions?

[Jimmy_041]

That's actually a false argument, made for political purposes by Labor, to defend the fact that they have to favour their mates.
Not all of the members are still paying tax but they keep the benefit as well.

IF, the granting of excess credits is so bad, why don't you agree that they should cut it out for everyone? You suggest getting rid of the dividend imputation system altogether, so why can't you agree that getting rid of the excess credit part for all is therefore a good idea? Imagine the tax windfall Labor would have then!!

Some pooled super funds and members of those funds may be disadvantaged by the policy as well.
I agree with you on the last point, get rid of the excess credit part altogether:

You sure about that? Mind you, you didn't say how many. AustralianSuper says bugger all!

Australia's largest super fund says members will be unaffected
Joanna Mather - Australian Financial Review

The nation's largest superannuation fund has confirmed that all 2.2 million of its members will be sheltered from Labor's plan to make franking credits non-refundable.
The proposed change will have "no material impact on net investment returns", AustralianSuper spokesman Stephen McMahon told AFR Weekend.
This is in sharp contrast to members of self-managed superannuation funds, who will bear the brunt of Labor's dividend imputation overhaul.

Labor's franking credit change will will have "no material impact on net investment returns", AustralianSuper spokesman Stephen McMahon told AFR Weekend. Gabriele Charotte GLC

The SMSF Association forecasts a loss of $5000 a year in refunds for an average fund with two members worth $1.1 million.

Labor has been criticised for protecting industry super funds, which are jointly owned by unions and employer groups, from its changes.

But all pooled funds, including those owned by major financial institutions such as banks, will be largely unscathed.

This is because they have lots of members who are still saving for retirement and therefore paying tax on contributions and earnings.

There will be a small effect on pooled funds, as Australia Tax Office figures for 2015-16 show.

Two thousand funds regulated by the Australian Prudential Regulatory Authority (APRA) received franking credit refunds worth $308 million that year.

The Labor policy will deny low and zero-rate taxpayers such as self-funded retirees refunds for excess franking credits in order to increase government revenue by $55.7 billion over a decade.

Franking credits are paid to shareholders to account for tax paid at the corporate level.

For people who pay little or no tax, such as super funds and retirees, excess credits are paid out as refunds.

Labor plans to make those credits non-refundable, although a "pensioner guarantee" will mean anybody receiving an age pension – either full or part – or allowance from the government (of the type Centrelink pays) will still get refunds.

There is also an exemption for SMSFs with at least one member receiving a government age pension on or before March 28, 2018.

But after that no SMSFs will be eligible to receive refunds.

The result is a system that will deliver different outcomes depending on which sort of super fund is used, angering those with SMSFs.

The policy has also prompted questions about how franking credits are distributed in pooled funds.

Mr McMahon rejected claims that people drawing a retirement income from an industry fund do not receive the full benefit of franking credits because those credits are used to minimise the tax liabilities of other members.

"AustralianSuper's crediting rate procedures ensure that the members' accounts are adjusted throughout the year to provide the accumulation and pension members their respective share of the full benefit of the franking credits," he said.

"Pension members are provided with their respective share of the full benefit of the franking credits through the crediting rate process."

KPMG tax director Ross Stephens agreed almost all industry and retail funds fully allocated franking credits to individual members.

"It was the case that some funds didn't always do so, but we'd be talking five to 10 years ago," he said.

Industry Super Australia director of public affairs Matthew Linden the tax benefits of franking credits allocated to individual members usually flows through "crediting rates" or "unit pricing".

"The objective of crediting rate and unit pricing mechanisms is to ensure members are treated equitably in a pooled investment environment," he said.

"The post-tax investment returns of members in funds which normally have tax liabilities – regardless of sector – are unlikely to be affected by the opposition's proposal."

And nothing like keeping your CPSU mates on board: There is also an exemption for SMSFs with at least one member receiving a government age pension on or before March 28, 2018.