Opposition leader Bill Shorten released the policy plan yesterday, claiming it would largely impact high-net-worth individuals.
However, the move is likely to impact a diverse cross-section of retirees.
Under this proposal, taxpayers with an effective average tax rate of 30 per cent or over will receive the full benefit of franking credits, while those on lower incomes will lose out, according to analysis from the Self-managed Independent Superannuation Funds Association (SISFA).
“Mr Shorten is meddling with the successful concept of imputation – that when company dividends are paid they are taxed at the individual’s tax rate with full credit for the tax already paid by the company,” said SISFA managing director Michael Lorimer.
“Under Labor’s plan, anyone in retirement and living on their superannuation savings will now have every dollar of their income from dividends taxed at a rate of at least 30 per cent,” he said.
Mr Lorimer said while Labor claims the plan to deny dividend tax refunds to super savers will mainly hit SMSFs, in practice, millions in APRA-regulated funds, including industry funds, will be impacted.
Despite the headline claims from the Labor party, the Tax Institute sees the measure as a thinly veiled cash grab. If implemented, the policy could raise about $11 billion.
“It is what one could readily describe as the politically low hanging fruit – easily done with minimum legislative change; saves a bundle in revenue and causes relatively minimal damage to Labor’s constituency,” said Tax Institute senior tax counsel Professor Bob Deutsch.
The move is also likely to cause some uncertainty in local share markets, which is a favourite of self-funded retirees in particular.
“It will ... cause some ructions in equity markets where tax refunds of excess imputation credits have been an important part of the investment matrix for equity investors, particularly SMSFs,” said Mr Deutsch.
Are you thinking of expanding your offering into SMSFs to grow your client base? Become a pro at SMSF fundamentals and make your clients bulletproof with the SMSF Foundations course. Learn directly from Aaron Dunn from Smarter SMSF as he deep-dives into the fundamentals you need to know to successfully undertake your work as an SMSF practitioner. Earn up to 21 CPD hours! Learn more