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Investments, Portfolio Construction, Retirement

SMSFs will unload Aust shares under Labor policy

Research warns of impact on ASX from Labor's franking credit plan.

A SuperConcepts survey has found almost three-quarters of SMSF trustees plan to drop Australian shares and change their investment strategy to compensate for the loss of franking credit income should Labor’s proposal to remove refundable franking credits become policy.

The study of 632 SMSF trustees revealed 72 per cent of respondents will change their investment strategy, while 61.6 per cent said their share portfolio will shift to foreign markets.

SuperConcepts chief executive Natasha Fenech said: “This is a big concern for the Australian Securities Exchange, a big concern for local companies contemplating the cost of capital from overseas sources and a big concern for the future ownership of local firms if it’s no longer viable for locals to invest.”

Fenech also expressed concern that 14.5 per cent of respondents are contemplating closing their SMSF as a result of this policy, one she said does not apply tax policy consistently to individuals across different superannuation structures.

“SMSFs play a critical role in the super sector to provide choice and competition against industry and retail funds, and it’s clear that everyone benefits from the competition as it keeps fees in check when consumers have adequate choice in the market,” she said.

“Without a doubt this is one of the most pressing election issues facing SMSFs in pension phase and the choices being forced on them are not what they want. It will drive capital away from Australian companies and therefore doesn’t allow for Australians to support brands remaining locally owned.”

Meanwhile, 1.4 per cent of respondents thought they might withdraw their super and go on the age pension.

Managed funds, term deposits, fixed interest and property attracted between 25 per cent and 27 per cent of respondents’ interest as an alternative to Australian shares that pay fully franked credits.

The survey also showed 66.8 per cent of respondents believed the proposal will affect them a great deal, while 20.3 per cent expect a significant impact.

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