14 Mar 2019
On 28 March 2018, the Federal Opposition announced a proposal to change how franking credits (otherwise known as imputation credits) are taxed—from a refundable tax offset to a non-refundable tax offset.
The policy would make franking credits non-refundable for individuals and super funds.
To ensure the measure doesn’t impact those receiving a government pension or allowance, the Opposition announced a Pensioner Guarantee as part of the policy, meaning recipients would still receive any excess dividend imputation credits as a cash refund.
The proposal would take effect from 1 July 2019.
Who would be affected?
It’s likely the proposed measures would most impact self-managed super funds invested primarily in Australian shares where members are in pension phase, and aren’t receiving a full or part government pension or allowance.
However, the full extent of the proposal is still largely unknown. Based on our current understanding, we expect to continue to use franking credits to offset our income tax liability.
At this stage, the Opposition hasn’t provided enough detail in their proposal for us to provide an impact assessment on our investment options.
It’s not yet law
It’s also important to remember that at the time of writing, this policy isn’t supported by the current government and would depend on the Opposition winning the next federal election, likely to be sometime in May.
We’re actively monitoring these developments and will provide you with further information as it comes to hand.