The Financial Services Council (FSC) has called for a moratorium on adverse changes to the superannuation system, including changes to franking credit refunds.
An FSC survey of large super funds has revealed the number of Australian beneficiaries is considerably larger than the number of individuals and SMSFs who benefit from refunds.
While refunds provide a smaller average benefit for individuals in large super funds than for SMSFs, the survey showed over a lifetime the benefit of refunds for some members could add up to $55,000 in retirement.
FSC chief executive Sally Loane said: “The FSC considers that franking credit refunds should continue. They provide substantial support to the retirement savings of millions of Australians, including many with fairly modest savings.
“Constant tinkering with the rules on retirement savings and superannuation, and hitting retirees hardest, will only erode confidence in the system, leaving more Australians reliant on the age pension.”
In its submission to the House of Representatives Standing Committee on Economics inquiry into the implications of removing refundable franking credits, the FSC said franking credit refunds benefited up to 2.6 million members of large super funds in 2015/16 and up to 3.5 million members in 2014/15.
Franking credit refunds mean an Australian investor in local shares pays the same overall tax as an investor in other Australian assets, including bonds, term deposits, property and infrastructure, it said.
Restricting refunds could mean some low-income earners, retirees and super funds will face a tax penalty if they invest in shares, it noted.
The FSC survey of 14 retail funds also found many super funds with low balances benefit from refunds. Four surveyed funds had an average balance below $100,000.
There were 73,000 accounts in these funds and refunds increased returns to all fund members on average by 0.26 per cent a year, the survey found.
There were 66,000 retiree accounts in the surveyed funds. If the retirees received refunds, the average benefit per retiree was $850 a year, the survey showed.