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Regulation, Tax

Imputation refund policy to soften

Impact of the imputation refund policy has been exaggerated.

The federal opposition’s proposed imputation dividend refund ban is not as significant an issue as it has been made out to be and is likely to be adjusted before being legislated if Labor wins the next election, according to BlackRock.

BlackRock Australia head of fundamental active equities Charlie Lanchester told the BlackRock Investment Institute’s 2019 Global Investment Outlook media briefing in Sydney today that Labor’s proposal was an odd tax.

“It doesn’t exist anywhere else in the world and some adjustment actually makes some sense,” Lanchester said.

“But whether it comes in across the board, I suspect it won’t happen.”

He said it does not seem reasonable for high net worth clients to be eligible to receive large amounts of refunds from the system.

“But if you were to penalise small investors who rely on their franking credit to supplement their income, [that is] possibly a harder political answer,” he noted.

“I think it’s still a work in progress.”

On the issue of how Labor’s negative gearing policy proposal will affect the housing market, BlackRock Australia head of fixed income Craig Vardy said there is uncertainty lingering around what investors should do if they are looking to invest in property.

Vardy said he believes the policy will not be implemented immediately if Labor wins the next election.

“You’re probably looking at maybe 12 months down the track. So there’s uncertainty around what to do now if you are a potential investor into property. Do you go now because you think you want the tax benefits and you’re concerned about the capital price implications of it?” he said.

“And does that underwrite house prices over the next 12 months?”

As house prices drop and investors contemplate the possibility of negative gearing policy changes, they may consider looking at investing in property now, he added.

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