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Superannuation, Tax

Franking credits feature in first election debate

Tax refund, SMSF, franking credit,

Franking credits have featured as an election issue in a debate between the leaders of the major parties.

Prime Minister Scott Morrison and opposition leader Bill Shorten have argued over the effect of the removal of franking credit refunds on pensioners as part of the first televised election debate, with Morrison accusing Shorten of ignoring the impact on SMSF trustees.

The issue was raised by an audience member who asked Shorten in regard to franking credit refunds: “Is there a limit based on a shareholder’s worth or value and how will this affect pensioners with small holdings?”

Shorten replied: “Our franking credit proposal is not interested in affecting pensioners at all.

“Our policy does not apply to people who receive a pension or part-pension.”

In response to Shorten, Morrison said this was not the case and people who had drawn a pension from their SMSF after April last year would be hit by a “retiree tax”.

“Fifty thousand pensioners will be hit by the tax Labor proposes to bring in and it all has to do with self-managed super funds.  If someone goes into an SMSF and are in pension phase, they will get hit from after April last year,” he said.

In responding to a question from a journalist about whether the Labor policy removed a tax rebate for those not paying tax, Morrison countered, claiming those receiving rebates had already paid tax.

“They have paid tax all their lives and this is the great offense many retirees have felt with this measure,” he said, adding the $5 billion paid in rebates was being used by people to plan their retirement based on access to “legal franked credit rebates”.

While Shorten conceded he was not speaking about pensioners in SMSFs when answering the initial question, he said the opposition was aware some in that situation would be affected immediately, as would others in the future.

“Pensioners and part-pensioners are not affected, but anyone who, and there are about 20,000 [people] we are aware of as at March last year who were in an SMSF – which is not normally the vehicle of choice for pensioners – are not affected, and a very small amount who are in an SMSF in the future may be affected,” he said.

He concluded his comments by restating the Labor Party’s position on franking credits: “This is purely a reform. This nation can’t keep giving money in the form of tax cheques to people who did not pay tax.”

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