SMSF services provider SuperConcepts has joined a number of industry voices welcoming the recommendations of a parliamentary inquiry to retain refundable franking credits, claiming the move would retain the zero tax rate for those who pay no tax.
SuperConcepts general manager – technical and education services Peter Burgess said the firm rejected the idea that those who paid no personal income tax should not receive a refund of excess franking credits.
“The simple fact is the retirement incomes of these individuals has been reduced by the tax paid on company earnings – whether the tax is levied on individuals directly or indirectly it’s still a tax that reduces the disposal income of investors,” Burgess said.
He added that refundable franking credits were part of the dividend imputation system as they created tax neutrality and ensured individuals on a zero-tax rate paid no tax.
“In other words, they ensure the system operates the way it should by imposing overall tax on distributed profits at the marginal tax rates of resident taxpayers,” Burgess said, adding that any change would “create inequities and distortions beyond those which the removal of refundable franking credits claims to address.”
“One such distortion will be the impact on individuals who choose to take more control over their retirement savings. SMSFs have a legitimate claim to be part of the superannuation system as they represent those who are fully engaged with their retirement savings,” he said.
According to Burgess the proposal to remove refundable franking credits, as put forward by the Labor Party, was an unjust proposal that gave an advantage to larger superannuation funds over SMSFS and Government policy should not be used to reduce consumer choice in the superannuation sector.
“It’s difficult to reconcile why a member in the pension phase in an SMSF should miss out on receiving a refund of excess franking credits when that same member in a larger fund will continue to benefit from excess franking credits,” he explained.
“Not only do SMSFs play a valuable role in allowing individuals the choice to exert more control over their retirement savings, they also provide more choice and a competitive dynamic in the superannuation sector.”
The recommendation to retain refundable franking credits was made by the House of Representatives Standing Committee of Economics late last week which also recommended that any policy that heavily reduces retirement income is part of a wider tax policy.
The comments from SuperConcepts follow similar messages of support for the Committee’s recommendations from the Financial Services Council, the Alliance for a Fairer Retirement System and Wilson Asset Management chief executive Geoff Wilson.