Investments, Superannuation, Tax

Government super taxes hit by share buy-backs

The federal opposition’s proposed ban on franking credits appears to have made an impact on the level of superannuation fund taxes received by the government, which has named share buy-backs as a key reason for the reduced figure.

In presenting the 2019/20 budget, the government stated tax receipts from superannuation funds are expected to grow by 5.1 per cent in the 2019 financial year.

According to the budget papers, however, tax receipts from superannuation funds would fall by 14.5 per cent in the 2020 financial year and “the forecast fall in 2019/20 mainly reflects the impact of recent off-market share buy-backs”.

AMP Capital recently reported special dividends and off-market share buy-backs have hit an eight-year high, driven mainly by concerns around Labor’s proposal to ban franking credit refunds from 1 July 2019 if it wins the next election.

Despite the predicted downturn, the budget papers said all taxes related to superannuation were likely to be $650 million higher for the current financial year than estimated and $800 million higher in 2019/20, rising to $2.1 billion higher over the four years to 2022/23.

The papers attributed the higher tax receipts to stronger outcomes from superannuation funds in the 2018 income year, and further gains since the 2018/19 budget update had also contributed to the upward revision in expected tax receipts.

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