The Labor Party’s proposed policy to ban excess franking credits will diminish the control and choice of SMSF trustees and members, a House of Representatives Standing Committee on Economics hearing into the proposal was told today.
At a public hearing in Sydney for the committee’s inquiry into the implications of removing refundable franking credits, Generation Wealth Partners principal Joe Jutrisa said if there is such a change to pensions, his view is the policy must be applicable to pensions across the board.
“This should not just hurt self-funded retirees or those in SMSFs. My view is that there should be a level playing field for all,” Jutrisa told the committee.
“Self-funded retirees should not be the ones held responsible for the problems with the budget.”
Committee member and Liberal MP Jason Falinski commented: “So one of the negative impacts of this policy could be that it doesn’t raise the revenue that it’s expected to, while at the same time potentially closing down a very important part of the superannuation sector as well?”
Committee chair Tim Wilson then asked whether the policy was a deliberate attempt to try and undermine the SMSF sector.
“I see lots of heads nodding behind you,” Wilson observed.
Jutrisa said: “I didn’t want to take this down the political path but yes, there might be some.”
Wilson continued: “If you follow the logic through that there’s an attack on SMSFs – these are my words, not yours – the consequence is to try and promote people to shift into one type of superannuation [type], which diminishes the amount of control that people have. And obviously, this concentrates power around financial resources in the hands of a smaller number of people?”
Jutrisa replied: “Yes. What will happen [if the franking policy proceeds is] if you have people in SMSFs and people move [out of them in order to keep their franking], their options will be retail funds or industry funds. This is a potential outcome.
“Because they are trustees and because they are responsible [for the SMSF], they are far more engaged than the average investor in a retail fund.
“They generally set up SMSFs because they want to be engaged, they want to be in control and they want to be part of the investment decision process.”
Committee member and Labor MP Matt Keogh said: “I feel like you’re very resistant to people leaving SMSFs.”
Jutrisa replied: “No, I’m resistant about removing their choice to remain [in an SMSF]. If they do remain, there will be a financial consequence.”