The Labor Party’s policy shift to exempt people receiving the age pension from its changes to refundable franking credits will create a two-tiered treatment of SMSF members who access the pension in retirement.
That is the argument put forward by SMSF Association chief executive John Maroney, who responded to the ALP’s announcement today it would allow SMSFs with at least one pensioner or allowance recipient before 28 March 2018 to be exempt from the policy changes.
Maroney urged Labor to reconsider its initial policy to ban the refunding of franking credits due to its “deleterious” impacts on more than 1 million Australians, including those in SMSFs.
“Under Labor’s proposal, the only SMSFs exempt are those that currently have at least one member receiving the age pension,” he said.
“And in the future, there will be no protection for SMSF retirees who may need part-government support to supplement their superannuation income, creating an unfair, two-tiered and complex treatment of SMSF members who access the age pension in retirement.”
SMSF members who have saved to be self-sufficient and avoid relying on the pension will be worse off than people with lower savings but in receipt of refundable franking credits and a part pension, he noted.
He also argued the recent super reforms have already made super more sustainable.
“The transfer balance cap is limiting excess franking credits that would have been paid to SMSF members with large balances. Under the new transfer balance cap rules, SMSF members with more than $1.6 million will be paying tax on some of their earnings that will offset the value of their franking credits, limiting their refunds,” he said.
Under Labor’s policy modification, all pension or allowance recipients with individual shareholdings will be exempt and can receive cash refunds.