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So put a means test on franking credit rebates. There is no reason why someone earning $150k from investments should benefit from such a loophole.
How to avoid Shorten's plan to abolish the refund of excess franking credits
- Thread starter bigdog
- Start date
So put a means test on franking credit rebates. There is no reason why someone earning $150k from investments should benefit from such a loophole.
An individual who earns $150k from dividends & franking credits would have income tax at a personal level of approx $40k due.
Paying $40k tax doesn't seem like much of a benefit to me!
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Not if that individual received a large amount of tax free super.
M
Perhaps a better policy would be to leave franking credits as they are and once the member reaches 60/65 the earnings of their Superfund go into their Personal tax return and taxed at marginal rates.
ah...so it is the taxing of income earnt in the Super structure which is the issue.
Perhaps a better policy would be to leave franking credits as they are and once the member reaches 60/65 the earnings of their Superfund go into their Personal tax return and taxed at marginal rates.
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That would be a very "courageous" policy for any party to have.
If they set a thresh-hold of $50k it might help sweeten the pill.
Courageous as it may seem, I wouldn't be surprised to see more tampering here.
Only earnings taxed at marginal rate, not withdrawal of capital.
Ie, say at age 60 member has $1m. Through the next year income earnt is $35k dividend plus $15k franking credit. The fund pays no tax, but the member is liable for marginal tax on $50k, say 9k, tax credit for $15k franking credit, they receive a refund of $6k and have paid tax of $9k. They are due to pay $9k tax regardless of how much they take out of Super. Their super balance is $1.035m assuming they take no money out and they can take out as much or as little as they like, there is no benifit in leaving it in Super now apart from asset protection.
Only earnings taxed at marginal rate, not withdrawal of capital.
Ie, say at age 60 member has $1m. Through the next year income earnt is $35k dividend plus $15k franking credit. The fund pays no tax, but the member is liable for marginal tax on $50k, say 9k, tax credit for $15k franking credit, they receive a refund of $6k and have paid tax of $9k. They are due to pay $9k tax regardless of how much they take out of Super. Their super balance is $1.035m assuming they take no money out and they can take out as much or as little as they like, there is no benifit in leaving it in Super now apart from asset protection.
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Changes are made to simplify tax systems all over the world. There are always winners and losers. You're a winner 'great'. You're a loser, tough, just grin and think 'Australia First'.
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Why single out franking credits?
If Person A can use their tax free threshold to claim back tax with held from working part time
and
Person B can get $18,000 of tax free earnings from a rental property
and
Person C can get $18,000 of tax free earnings from Bank interest or Bond interest
why can't Person D claim back their Tax with held from their companies earnings?
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It simply doesn't make sense, 2 people could own the exact same asset and simply because one person owns it under a company structure he is taxed where as the person holding it directly pays no tax.
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A company is a separate legal entity from the shareholders, the company should pay tax on its profits and the shareholders should pay tax on their income.
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A company is just a conduit that people use to hold assets.
Imagine this situation, You and I both own apartments in the same building, you own apartment A and I own apartment B, but you happen to have bought yours under the name of your company while I own mine under my personal name.
If at the end of the year we have both made $18,000 on our identical properties, I get to keep the entire $18,000 tax free due to my tax free threshold, where as you will have to pay $5,400 company tax.
Me = $18,000 (tax free)
you = $12,600 (30% tax)
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Even though we invested in identical properties, and had the same investment return, and both have large super incomes etc
I got 42% more than you simply because you weren't allowed to take advantage of the tax free threshold where I could.
How does that make sense? why only attack people holding assets in company structures?
Imagine this situation, You and I both own apartments in the same building, you own apartment A and I own apartment B, but you happen to have bought yours under the name of your company while I own mine under my personal name.
If at the end of the year we have both made $18,000 on our identical properties, I get to keep the entire $18,000 tax free due to my tax free threshold, where as you will have to pay $5,400 company tax.
Me = $18,000 (tax free)
you = $12,600 (30% tax)
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Even though we invested in identical properties, and had the same investment return, and both have large super incomes etc
I got 42% more than you simply because you weren't allowed to take advantage of the tax free threshold where I could.
How does that make sense? why only attack people holding assets in company structures?
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So buy it in your own name, you have the choice. Companies give you legal separation from your company and allows you to limit your risk, so that is worth the cost of extra tax you may pay.
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Buying shares in companies is the only way to access investments for a lot of people,
you can invest in property for as little as $500 by buying shares in a realestate investment company, but you would need serveral hundred thousand dollars to own a property in your own name,
so again you are targeting people of lower means, who have no way of making some of these investments except via owning shares.
Also, some assets are so big, owning shares is the only way to access them, unless you are a billionaire, so again you are just limiting the places people of lower means can invest their funds, you can hardly tell a person with $10K to go and start their own Iron ore mine or supermarket company directly.
So what? I thought this was about people earning $150K in super but still using the tax free threshold.
Does it bother you that under this policy some one could still be earning $150K from their super, while still claiming the tax free threshold on Property investments, businesses, cash holdings, bonds and a million other possible investments, but you are only targeting people holding those assets under company structures?
The proposed legislation does nothing to stop people with other investments claiming their tax deduction.
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Of course it bothers me. I can see no good reason why super income should not be taxable. Can you ?
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Well super has its own tax rules.
But my point is, Why would you only want to create a ruling that only targets franking credits?
I mean if your goal is to stop people with large super accounts from taking advantage of the tax free threshold, simply banning franking credit refunds is a stupid way to do it, because people with large super accounts can still hold other investments and claim the deduction, plus alot of small players get hit in the cross fire.
you could simply have a rule that people with over X amount of super earnings don't qualify for the tax free threshold.
I struggle to follow what is written often due to loose terminology.
when peeps talk of super earnings in the same sentence as tax free threshold....what is this about? Is this tax the 0% and 15% tax amounts payable in pension or accumulation funds? or are peeps using the $18K PAYG type tax threshold here as being somehow linked to super?
when peeps talk of super earnings in the same sentence as tax free threshold....what is this about? Is this tax the 0% and 15% tax amounts payable in pension or accumulation funds? or are peeps using the $18K PAYG type tax threshold here as being somehow linked to super?
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what it means is that Super earnings are taxed separately to your regular earnings outside super.
For example, Some one could be earnings $100K inside their super and have that taxed according to the rules and rates of Super, while they also may have income outside of their super which they would pay tax on at the marginal rate, taking advantage of the tax free threshold.
The proposed plan would make it impossible for people to get a refund of the franking credits that they can get now when their earnings are below the tax free threshold.
However it would still allow people with Part time jobs, Investment properties, term deposits, bonds and share trading income and any other income from using the tax free threshold, it simply targets one set of investors eg, share holders.
Not only is it unfair to target one group of investors, but also targets smaller investors over larger ones.
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I will be fine, I earn enough dividends to put me in the highest tax bracket so I don't get a refund I have to contribute extra money to bring the 30% already paid up to my tax bracket.
But the smaller investors are the ones that will get screwed, just because they chose to invest in a company (which we need more people to do), instead of a direct investment property (which is already saturated) they will be over taxed.
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Value Collector
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Pensioners, what about everyone else? eg the other small investors, self funded retirees and low income earners.
and again why just franked dividends??? why are they fine with property investors and the other income sources not being taxed?
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Are you talking about low taxable income or low gross income ?
It really disturbs me that someone on $150k tax free super with $18k dividend income won't get a refund.
Do you really think that low (gross) income earners who struggle to pay the rent have the spare cash to invest in shares ?
