National Seniors Australia has warned proposed ALP changes that would end cash refunds to retirees claimed through share dividend imputation could backfire.
Chief Advocate Ian Henschke said today the plan, designed to claw back $59 billion over 10 years from wealthy retirees, could hurt many full and part aged pensioners who had been encouraged to diversify by including shares in their retirement portfolios.
Currently, when a company pays a dividend out of after-tax profit, its shareholders receive personal tax cuts called franking credits to prevent double taxation of company profits. In 2001, the Howard government made the scheme more generous by allowing shareholders to cash in when their franking credits exceeded their tax bill.
Wealthy retirees get the biggest cash refunds because income from superannuation is tax free for people over 60. But Mr Henschke said National Seniors was concerned that the proposed ALP change would negatively impact low and middle income earners, particularly pensioners.
Rather than only affecting the rich, there were many retirees with shareholdings who were not wealthy, but who would lose some of their income. “Under this proposal, a pensioner who has decided to put some money into bank shares rather than the bank itself who receives $100 in dividends will now only receive $70,” Mr Henschke said.
Mr Henschke said National Seniors was concerned about the impact of yet another proposed change that would affect retirement nest eggs and income. With an ageing population, people approaching retirement had been encouraged to invest in shares to help fund their old age.
With an ageing population, people approaching retirement had been encouraged to invest in shares to help fund their old age. “This change could affect their retirement plans and the sharemarket in general,” Mr Henschke said. “The present system has been in operation since 2001 and many people have made their decisions about their retirement based on income from shares. “There is no doubt if such a change is made, it will negatively impact many more people than the ‘very rich’ it’s aimed at. It will be felt most by those of modest means.”
Chief Advocate Ian Henschke is available for interview.
Media contact: Lynda Schekoske 0488 047 380 or Rosemary Desmond (07) 3233 9106.