Last week, the House of Representatives Standing Committee on Economics announced an inquiry into the implications of removing refundable franking credits, with Wilson Asset Management chair Geoff Wilson describing it as a “significant battle” won in its battle to maintain the current system.
According to a spokesperson for Wilson Asset Management, their petition against the proposal has gathered over 16,000 signatures so far.
Speaking to Accountants Daily, Verante Financial Planning director and chair of the SMSF Association’s NSW Chapter, Liam Shorte said most of his clients would see an average loss of between $5,000 to $15,000 if the proposal was to go through, and expressed concerns over investor behaviour as they looked to recover that shortfall.
“We’re not trying to say that people will go into poverty, but it is helping people to do these little extras and losing $5,000 to $15,000 a year will see them lose some of the little luxuries in life,” said Mr Shorte.
“I'm scared that they are going to start looking at stuff that carries more risk in the aim of chasing of the yield and that’s my concern.
“Most of my clients already have a diversified portfolio with significant overseas exposure but it is the DIY clients who just have term deposits and shares and deliberately built a portfolio just for franking credits, they are the ones who are going to start looking for better returns and looking at investments that aren’t quite safe and don't have a good track record but have a decent headline rate of 6 to 8 per cent return.”
Mr Shorte also believes accountants and advisers need to start reaching out to clients to explain the ramifications of the proposal now.
“People need to be acting now and we’re suggesting that every accountant, every financial adviser when they finish some of their tax returns for the financials for the year that they sit down and show people what they are going to lose in terms of franking credits,” said Mr Shorte.
“It is up to us as professionals to point it out to them and hopefully the groundswell and the government inquiry will raise the issue into the spotlight but we have got to be doing something as people's advisers.
“We need to move now rather than later – this is one of those times where it has nothing to do with politics, this is just really bad policy.”
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Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.