The latest research conducted by the Association of Superannuation Funds of Australia (ASFA) has revealed the abolition of the dividend imputation system would have the greatest negative impact on superannuation fund members, retirees and low to middle income earners.
Specifically the study found the move would result in a $4000 decrease to the income of an average retiree.
“Removing or changing dividend imputation may seem like a quick revenue fix for the government now, but it will have negative long-term effects on Australians’ retirement savings,” ASFA chief executive Pauline Vamos said.
“Initiatives like franking credits help to incentivise Australians to put money away for retirement as early and as often as possible.
“If we remove this benefit, it will have the most negative impact on retirees and low to middle income Australians who will see the tax rates on their superannuation earnings raised from 0 and 15 per cent respectively to 30 per cent across the board.”
Vamos added scrapping the dividend imputation system would see taxpayers having to bear a greater burden of funding an increased reliance on the age pension as a result of lower retirement income streams.
Further she warned abolishing franking credits could end up reducing investments in domestic equities and that the resulting double taxing of company income could encourage investors to favour asset classes like debt financing.
“It is imperative that we take a long-term view when considering tax reform and adequately cater for our growing retiree population,” Vamos said.