The SMSF Association has welcomed the decision by the House of Representatives Standing Committee on Economics to commence an inquiry into the implications of removing refundable franking credits.
Association chief executive John Maroney said the industry body remains “resolutely opposed” to Labor’s plan, which the ALP is proposing to introduce if it wins the next election, a move that would overturn a measure that took effect on 1 July 2000.
The measure is used by many SMSFs in retirement phase to build their investment and income strategies.
“It’s our stated belief that this proposal will affect more than 1 million Australians either saving for or in retirement and other purposes, with our calculations showing it will cut about $5000 of income from the median SMSF retiree earning about $50,000 a year in pension income,” Maroney noted.
“The notion that this proposal will only affect the wealthy is simply wrong.
“An analysis of ATO and Treasury data shows it is those on modest incomes who will be most affected, refuting Labor’s argument that the proposal will only target the wealthiest 10 per cent of SMSFs.”
The most likely consequence if the proposal becomes a reality will be substantial damage to the lifestyles of retirees who have prudently saved and are carefully drawing down on their retirement savings, he warned.
“It will also undermine confidence in the system, especially when considered in conjunction with the enormous changes introduced on 1 July 2017, having the deleterious effect of sending many retirees back to the drawing board to rethink their retirement income strategies.”
The inquiry offers an important opportunity for retirees and savers who will be negatively affected by the plan to voice their concerns to the House of Representatives committee, he said.
Since Labor announced its franking policy in March, the SMSF Association has joined forces with eight other like-minded organisations to form the Alliance for a Fairer Retirement System with the primary aim of opposing the initiative.
Economics committee chair Tim Wilson, in announcing the inquiry, said there had been legitimate community concern about the proposal to remove cash refunds for their full allocation of credits for individuals and super funds, adding it amounts to a tax on the savings of retirees.
