A Labor Government would continue to seek to abolish franking credit refunds from 1 July 2019 if it wins the upcoming Federal Election, according to Shadow Treasurer Chris Bowen, leading to one industry body to claim the move was discriminatory to SMSFs compared to other tax policies.
Addressing a Financial Services Council (FSC) function in Sydney, Bowen said the start date for the abolition of franking credit refunds would begin at the start of the next financial year, as announced when he outlined the Labor Party’s franking credits policy in early 2018.
When asked at the function whether that would change Bowen said, “There was no case to do so. We have been very up-front with that policy and the start date”.
Bowen also announced that Labor’s reforms to negative gearing and capital gains tax (CGT) discounts would commence from 1 January 2020, and that any investments entered into before that date would be protected by grandfathering provisions.
“That is, all investments made before the 1 January 2020 will continue to enjoy the current negative gearing and capital gains tax concession arrangements,” Bowen said, adding “This gives investors adequate time to plan and invest this year before the new rules come into force”.
“It also means that we will be able to take the necessary legislation through all the necessary legislative processes including ensuring draft exposure legislation is properly consulted on,” Bowen said.
These contrasting approaches to the start date of these policy changes drew criticism from the SMSF Association chief executive John Maroney who said the announcement by Bowen showed a ‘total disregard’ for self-funded retirees
“The Association has always opposed Labor’s proposal on the grounds it is iniquitous, discriminating against those retirees who have opted to manage their retirement savings through an SMSF while leaving many of those in APRA-regulated funds untouched – a clear violation of the sound policy principle of horizontal equity,” Maroney said.
“But now Labor is taking this discrimination to a new level, giving those affected by its CGT and negative gearing proposals time to adjust their investment strategies while denying self-funded retirees the same option,” he added.
Maroney said the lack of certainty around legislation that would allow self-funded retirees to restructure their affairs and was unjust and could lead to some being financially disadvantaged because of the rapid nature of the change.
“They have spent a lifetime working to be in a situation where they can self-fund their retirement – the very goal of the compulsory superannuation system that Labor introduced in 1992. Now they are not only having their self-sufficiency taken away but are being given no opportunity to find alternative strategies for their retirement savings,” Maroney said.