- Labor's proposed changes to dividend imputation 
Stan Moffatt (MAGNIFY Wealth) & Gilda Brisotto (Power Tynan)                   

 

There has been much in the media over the last couple of weeks in relation to Labor's proposed changes to the dividend imputation system.

Labor's proposal is to remove cash refunds for excess dividend imputation credits. This proposal has consequences for anyone who receives dividends from a company (both publicly listed and private companies). For example, if you or your superfund owns shares in listed companies (e.g. Commonwealth Bank), or your have your own company.

The Imputation System was introduced to eliminate double taxation on dividends from company profits. Under the system, shareholders can use imputation credit (also known as franking credits) to reduce their overall tax liability. Currently Individuals and Superannuation Funds can receive a cash refund from the Tax Office if their imputation credits exceed the tax that they owe. This refund can enhance returns and provide an extra income return.

Initially, as first announced, the Labor Government sought to limit the concession so that the imputation credits could be used to reduce tax, but not for cash refunds.

Due to intense lobbying from parties that would be adversely affected by the policy, Labor yesterday revised its policy for some retirees and SMSFs currently paying pensions, but there will still be over 1 million Australians adversely affected by the policy. As a consequence, there could be significant impact on Individuals' retirement income and SMSF portfolios' as currently some retirement plans and portfolios rely on the refunds as part of their investment strategy.

If you would like to know how these proposed changes would affect you and your personal circumstances, please call so we can arrange a time to meet and discuss with you.

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MagWealth (QLD) Pty Ltd,  ABN 85 616 916 851, trading as MAGNIFY Wealth is an authorised representative of Accession 3 Financial Advisers Pty Ltd  (Australian Financial Services Licence No. 331990).  All information and articles on this site are general in nature. They do not consider your personal circumstances. Please consult your financial adviser before acting. Liability limited by a scheme approved under Professional Standards Legislation.

 

Stan Moffatt is a member of the Chartered Accountants Australia and New Zealand.
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