Labor’s plan to remove cash refunds for excess dividend imputation credits has so far received broad criticism, particularly from retirees.
Opposition leader Bill Shorten released the policy plan last week, claiming it would largely impact high-net-worth individuals. However, the move is likely to impact a diverse cross-section of retirees.
John Alam says refundable franking credits have been a well-established principle for nearly two decades, having been introduced on 1 July 2000, and many clients in retirement phase have partly built their investment and income strategies around this policy.
At the very time retirees are looking for certainty with the superannuation system, especially considering the enormous changes that took effect on 1 July 2017, Labor’s proposal will again undermine confidence in the system and send many retirees back to the drawing board to rethink their retirement income strategies.
“The SMSF Association contends that this proposal will affect more than one million Australians saving for their retirement and other purposes. Their calculations show it will cut about $5000 of income from the median SMSF retiree earning about $50,000 a year in pension income. To be saying these people won’t be paying any more tax is just semantics".
“This hit on retirement incomes clearly is not just affecting the very wealthy and can substantially damage the lifestyles of retirees who have prudently saved and are carefully drawing down on their retirement savings”.
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