According to ATO statistics-
19% = 4.75 million
23% = 5.75 million
will have a marginal rate of less than 30 cents
so these people will lose franking credit cash refund.
19% of 25 million Australians = 4.75 million earn under $18,200. They have a $Nil marginal rate. They will lose 30 cents. They will lose every franking credit and every franking credit cash refund
23% of 25 million Australians earn $18,201-$37,000
They will lose 9 cents-11 cents franking credit cash refund depending on Medicare levy.
Shorten will exempt 3.5 million pensioners.
However, after 28/3/2018 pensioners in SMSF's are stuffed, and will not be exempt.
53% of 1,100,000 SMSF's are in Accumulation Mode = 583,000. They have 15% marginal rate. They will lose 15 cents franking credit cash refund
47% of 1,100,000 SMSF members are in pension mode. They have $Nil marginal rate. They will lose 30 cents franking credit cash refund.
Very simply, Dividend Imputation means that the dividend you receive is adjusted in your tax return to your marginal rate. If the dividend is say 70 cents, and the franking credit is 30 cents. You have a franking credit offset but you may actually pay up 47 cents , being an additional 17 cents, paid to the ATO.
This is adjusted in your income tax return.
Because there is no tax rate of 30 cents, you or your Super Fund either receives a franking credit cash refund or alternatively pays the ATO a franking debit in your tax return.
So here’s what happens:
Dividend Marginal Refund Pay to the
30 cents 0 cents 30 cents
30 cents 21 cents 9 cents
30 cents 34.5 cents 4.5 cents
30 cents 39 cents 9 cents
30 cents 47 cents 17 cents
30 cents 15 cents 15 cents
30 cents 0 cents 30 cents
It's simple. I am an accountant. If an individual or Super Fund's marginal tax rate is under 30 cents, and you get a dividend which has a franking credit to 30 cents, you will get a franking credit cash refund. Its as simple as that. So who are the losers?
People with under $18,200 income - 4.75 million people
People with $18,201-$37,000 income 5.75 million people
Total poor people under $37k income 10.5 million people
Less pensioners exempted by Shorten -3.5 million people
Poor people under $37k to lose 7.0 million people
SMSF members - Pension Mode 517,000 people
SMSF members - Accumulation Mode 583,000 people
Total number of losers 8.1 million people
What happens is you get a dividend , say $700. You gross up the dividend to $1,000. That income goes in your tax return. You get a franking credit for $300 tax paid. You pay tax on the $1,000 at your marginal rate. The amount of franking credit doesn't change no matter what taxpayer you are, individual or Super Fund. However the marginal rate changes depending on what income you earn.
Robert Carling quotes 2015 ATO records to show that 1,000,000 people will lose $1.3 Billion in Franking credits each year.
Go to the site..
If you earn over $37,000, then your marginal rate is either
39 cents or
You receive a franking credit or franking credit offset of 30 cents but eventually pay the dividend at your marginal rat in your tax return. So the rich person ends up paying dividends from the Commonwealth Bank at 47 cents, not 30 cents. The person on $37.001 income will have to send the ATO at 34.5 cents, not 30 cents.
So why does Shorten want to tax the poor person under $37k income at 30 cents for a dividend, when they currently are on $Nil marginal rate or 21% ?
You can currently use this form or even telephone the ATO to get a cash refund of excess franking credits. This form is for those on less than $37k income. There are 10.5 million people under $37k income. Shorten will ban people using this form in the future to claim an excess franking credit.
Some people call the abolition of Excess Franking Credits is a "Retiree Tax". As per above, there are 7 million persons (apart from 3.5m pensioners) that would be affected, not just 517,000 in Pension Mode retirees.
There are 7 million losers who earn less than $37k income, apart from pensioners.
In relation to SMSF's, some people seem to have forgotten about Accumulation Funds who will also lose Excess Franking Credits to the tune of 15%.
Basically there are two Super Fund tax rates -
Accumulation Phase - 15% For people 18 years to 60 years
Pension Phase - NIL% For people aged over 60 years
The government since 2007 has allowed persons over 60 to have a tax free Super Fund. Of late, the maximum Pension Fund size is $1,600,000.
For Pension Funds, the fund would get full franking credit cash refunds.
For SMSF Accumulation Funds, the tax rate is 15%. They currently receive 30 cents franking credit offsets. So in these funds, they currently get 15% franking credit cash refunds. Shorten will ban these 15% franking credit cash refunds.
So the Shorten banning of franking credit cash refunds is not a "retiree" tax. It is a tax on any individual or Super Fund that has a marginal rate of less than 30 cents..
Most SMSF funds have a high proportion of Australian shares in their investment portfolio. Some funds have 100% Australian Shares. If Shorten wants to abolish franking credit cash refunds then he is effectively taxing these funds at 30%, the same as a company.
Effectively Shorten wants to tax Accumulation Funds and pensions funds at 30% for those funds that have 100% of Australian Shares that are fully franked to 30%.
Some stupid Labor campaigners falsely say -
Labor banner - "You won't lose franking credits"
Oh yes, you will lose franking credits if you vote Labor. If any individual or Super Fund's marginal rate is under 30 cents, you will lose franking credits.
If you have unused franking credits, because your income tax is reduced to $Nil and you cannot use all franking credits to obtain franking credit cash refunds, then you lose franking credits. It's that simple.
A franking credit is what is available to use, which is on your dividend statement. In this case it's $300. A franking credit offset is what you can actually use as a deduction against tax in your income tax return.
Further explanation of ATO example:
Dividend franked to 30 cents $300
Franking credit available $300
Previous tax liability $200
Franking credit offset utilised $200
Franking credit used $200
Unused franking credit $100
Unused franking credit offset $100
Franking credit cash refund $100
In this case a franking credit of $100 is lost. So much for the Labor campaigner liars saying you won't lose franking credits.
Shorten says the Super Funds will stay the same.
THE "SAME" is that they will still rip you off by charging around 20% in admin fees. See the Annual Reports. They are all online.
For example , the annual report of the MTAA includes large remuneration of $229k to $437k
The "SAME" is that their returns for 30/6/18 were averaging around 1% return after taking out All Ords increase of 9.4%.
Pin the tail on the donkey would be a better way of making better returns.
These funds typically only have 20% -50% Australian Shares.
These funds typically can soak up franking credits because they have other income and other income tax to offset.
But it has been reported that up to 50 of 240 of the retail and Industry Super Funds currently have franking credit offsets available but do not distribute to members.
Refer another section of this site for further information.
Authorised by David Manteit, Brisbane QLD