The Albanese government

[sptrawler]

The discussion has been done to death I would never agree that the changes after 2000 were worthy likely just vote buying by Howard as for Shorten I never liked him (AWU) every chance he would have made a better PM than SP’s love child Morrison but was just reminding SP he is taking welfare that is a net negative from federal revenue

So is everyone else, who gets franking credits and applies them against their tax payable. Lol
If Shorten would have made a decent PM, he would have got there.

 

[IFocus]

So is everyone else, who gets franking credits and applies them against their tax payable. Lol
If Shorten would have made a decent PM, he would have got there.

If that's the case why is it a massive negative on revenue?

Answer: ............

 

[sptrawler]

If that's the case why is it a massive negative on revenue?

Answer: ............

Because as I said everyone who applies the franking credit against their taxable income, pays less tax, because the company has already paid 30% tax on the dividend the shareholder receives.
Back of the napkin, the shareholder puts the dividend on top of their income and then deduct the franking credit off the tax payable.

Income thresholds	Rate
$18,201 – $45,000	16%
$45,001 – $135,000	30%
$135,001 – $190,000	37%
$190,001 and over	45%

So using the tax scales above, again back of the napkin for simplicity:

Those on top whack income bracket only pay 15% extra tax on their dividend after removing the franking credit, because the 30% the company has paid is deducted.

Next down, those in the 37% tax bracket, pay 2% extra tax on their dividend, as the company has already paid 30% tax on it.

Then no tax is payable at 30%, as the tax payable, is the same as the tax already paid by the company.

At the $18k - $45k tax scale, only 16% tax is payable, but the company has already paid the ATO 30% tax, therefore the ATO refunds 14%.

Up to $18k no tax is payable, therefore the 30% tax paid by the company to the ATO, is refunded. This is because the Government has deemed, the person doesn't earn enough, so they shouldn't have to pay tax..

If a person is retired and in the pension phase, the Government deemed that no tax is payable on earnings from superannuation investments that support the pension. Therefore the 30% paid by the company, on behalf of the pensioner, is refundable to the superannuation fund.

It the person is retired, but not in the pension phase the earnings pay tax at 15% on all earnings, therefore of the 30% tax paid by the company, 15% tax is refunded to the superannuation fund.

What aren't you understanding?

 

[Smurf1976]

If that's the case why is it a massive negative on revenue?

Answer: ............

Ultimately for the same reason that any tax not paid twice is affecting revenue compared to if it were paid twice.

If we required payment of fuel excise at the pump, then paying it again in the shop when paying for the fuel, then that'd bring in $ billions.

If we required employers to pay income tax, then required employees to pay it again, that'd bring in an outright fortune.

In truth though if we're going to double charge the tax, well it'd be a lot more honest to just increase the rate. Just say we're getting rid of the tax free threshold and there's a minimum tax rate no matter how little you earn.

Politically the fuss was largely because Labor was proposing a measure that hit lower income earners directly. If they'd done it differently, if they'd targeted those with a job rather than those without one, they'd almost certainly have got away with it. But a tax measure that has zero impact on the average person unless they become unemployed, in which case they suddenly face the full brunt of it, was never going to fly if done by Labor.

That was the key objection to it - because an awful lot of people, blue collar especially, are consciously aware that "anything over 50 is a bonus" when it comes to being employed. Ageism is rife in Australia - suffice to say I've seen far more examples of ageism than I've seen of sexism and racism combined. Hence the mindset of many to accumulate investments outside superannuation, emphasis on that point of being outside super and thus being made with money on which Income Tax has already been paid and with all investment income also taxed, to tide them over from retirement until superannuation preservation age is reached. Because they've seen far too many examples of others forced to retire in their 50's or even 40's to think it won't happen to them.

Now there are plenty of other countries that don't have the same system that's true. They do in general however have lower tax rates to start with, that's the offset. The need for it in Australia is because we're talking about income that has already been taxed at a substantial rate when it was earned from working, and where the investment returns are similarly taxed at the marginal rate.

Now if someone's rorting the system, and I'm aware there are ways to do that, well then I'd absolutely support cracking down on that yes. No argument there, close those loopholes absolutely but do so in a manner that doesn't whack over the head someone who's done nothing wrong apart from finding themselves unemployed. That's never going to be acceptable.

 

[SirRumpole]

When big companies take our natural resources dirt cheap and then make massive profits flogging them off, there is very little justification for taxing the low paid worker.

I wonder whatever happended to the resources super profit t ax that Swan wanted to bring in? Considering the state of the Budget now and for the foreseeable, one would have thought Labor would revisit that policy.

 

[sptrawler]

Ultimately for the same reason that any tax not paid twice is affecting revenue compared to if it were paid twice.

If we required payment of fuel excise at the pump, then paying it again in the shop when paying for the fuel, then that'd bring in $ billions.

If we required employers to pay income tax, then required employees to pay it again, that'd bring in an outright fortune.

In truth though if we're going to double charge the tax, well it'd be a lot more honest to just increase the rate. Just say we're getting rid of the tax free threshold and there's a minimum tax rate no matter how little you earn.

Politically the fuss was largely because Labor was proposing a measure that hit lower income earners directly. If they'd done it differently, if they'd targeted those with a job rather than those without one, they'd almost certainly have got away with it. But a tax measure that has zero impact on the average person unless they become unemployed, in which case they suddenly face the full brunt of it, was never going to fly if done by Labor.

That was the key objection to it - because an awful lot of people, blue collar especially, are consciously aware that "anything over 50 is a bonus" when it comes to being employed. Ageism is rife in Australia - suffice to say I've seen far more examples of ageism than I've seen of sexism and racism combined. Hence the mindset of many to accumulate investments outside superannuation, emphasis on that point of being outside super and thus being made with money on which Income Tax has already been paid and with all investment income also taxed, to tide them over from retirement until superannuation preservation age is reached. Because they've seen far too many examples of others forced to retire in their 50's or even 40's to think it won't happen to them.

Now there are plenty of other countries that don't have the same system that's true. They do in general however have lower tax rates to start with, that's the offset. The need for it in Australia is because we're talking about income that has already been taxed at a substantial rate when it was earned from working, and where the investment returns are similarly taxed at the marginal rate.

Looking at my own investments outside superannuation, practical reality is the bulk of it's with money that was taxed at 39 or 47% when originally earned from working. Then I've paid generally 39 or 47% tax on dividends. So government's already done quite nicely there and in addition to that the whole point of having such investments does serve the purpose of ensuring I won't be paid welfare. That's already doing more of my own accord, saving government big $ when compared to someone who simply spends the lot then heads down to Centrelink the moment the wheels fall off. Those rates I've quoted include the Medicare levy but that's effectively an extension of Income Tax in practice.

Now if someone's rorting the system, and I'm aware there are ways to do that, well then I'd absolutely support cracking down on that yes. No argument there, close those loopholes absolutely but do so in a manner that doesn't whack over the head someone who's done nothing wrong apart from finding themselves unemployed. That's never going to be acceptable.

As I said, if they had wanted to make it fair, it wouldn't have been a problem, take it off everyone.

They were only going to take it off the poor mum and dad investors who had bought into Telstra and CBA and SMSF's, they weren't going to take it off Industry funds, that stank of coercion.

 

[sptrawler]

When big companies take our natural resources dirt cheap and then make massive profits flogging them off, there is very little justification for taxing the low paid worker.

I wonder whatever happended to the resources super profit t ax that Swan wanted to bring in? Considering the state of the Budget now and for the foreseeable, one would have thought Labor would revisit that policy.

Whatever happened to mining companies having to build value adding as happened in the 1960's when Kwinana, Whyalla, Kembla were built?
Whatever happened to mining companies having to build towns and infrastructure in remote areas, rather than the Government having to supply it?
Why isn't there a thriving steel industry in the NW of W.A? When there is a thriving nickel industry in Indonesia dealing in pig nickel started 4 years ago, yet the NW of W.A has been built since the 1970's.

 

[IFocus]

Whatever happened to mining companies having to build value adding as happened in the 1960's when Kwinana, Whyalla, Kembla were built?
Whatever happened to mining companies having to build towns and infrastructure in remote areas, rather than the Government having to supply it?
Why isn't there a thriving steel industry in the NW of W.A? When there is a thriving nickel industry in Indonesia dealing in pig nickel started 4 years ago, yet the NW of W.A has been built since the 1970's.

All gets paid out as franking credits.

Labor, Swan, Rudd were weak the mining super profits tax was a missed generational opportunity Gina has never had it so good.

 

[wayneL]

I don't understand why socialists have such a problem understanding franking credits. Companies can pay out dividends as either franked or unfranked.

Let's say both companies A and B have $10 dollars in earnings they wish to payout as a divided. And let's say for ease of the maths, the shareholder is on a marginal tax rate of 50%.

Company A being fully franked pays out $7, having already paid 30% company tax, leaving the shareholder to pay the remaining $2 to bring it to his marginal rate netting $5.

Company B pays out the full $10 not having paid the company tax, leaving the shareholder to pay $5 tax, netting $5.

Same result.

However the removal of franking credits would mean the shareholder of company A would be paying $3.50 in income tax, netting only $3.50.

That is double taxation and an iniquity.

I don't see how this is so hard to understand.

 

[sptrawler]

I don't understand why socialists have such a problem understanding franking credits. Companies can pay out dividends as either franked or unfranked.

Let's say both companies A and B have $10 dollars in earnings they wish to payout as a divided. And let's say for ease of the maths, the shareholder is on a marginal tax rate of 50%.

Company A being fully franked pays out $7, having already paid 30% company tax, leaving the shareholder to pay the remaining $2 to bring it to his marginal rate netting $5.

Company B pays out the full $10 not having paid the company tax, leaving the shareholder to pay $5 tax, netting $5.

Same result.

However the removal of franking credits would mean the shareholder of company A would be paying $3.50 in income tax, netting only $3.50.

That is double taxation and an iniquity.

I don't see how this is so hard to understand.

What I can't understand. is why someone who obviously invests in shares and obviously would get franking credits, has so much trouble accepting that others should get them.

That's the problem with morally conflicted people, where their ideological belief in what their political idols profess, conflicts with their personal investment objectives.

It is fine that someone who has a SMSF loses their franking credits, but is also fine that union run Industry super funds don't lose their franking credits, because that is different.

The same as it is fine that a mum and dad pension couple who have say 2000 TLS shares, shouldn't get the 3c franking credit tax refunded ($60), yet is is ok that Twiggy get a huge tax reduction.
So the pension couple or an individual pensioner would pay the same tax, as someone on $135,000 and that's ok.
Just one of the ironies of the morally righteous extremists, the pensioner couple pay 30% tax on their dividend, while Gina and Twiggy get a tax reduction, go figure.
looking after the little person, yeh, nah

From Google
Andrew Forrest, also known as "Twiggy," has received substantial payouts from Fortescue Metals Group (FMG) dividends, which are often fully franked. This means Fortescue has already paid company tax on the profits distributed as dividends, and the shareholders, including Forrest, can claim a tax offset or refund on the franking credits. For example, in 2019, Forrest received a $654 million payday from a special dividend, and in 2022, he received $1.37 billion from a fully franked dividend.

 

[IFocus]

I don't understand how franking credits get paid out of government revenue when no tax has been collected to cover the cost?

If its net negative on revenue then its welfare.

That's what happened after 2000.

 

[sptrawler]

I don't understand how franking credits get paid out of government revenue when no tax has been collected to cover the cost?

If its net negative on revenue then its welfare.

That's what happened after 2000.

Tax has been collected.

The way the Government accounts for things changes all the time, maybe the way franking credits were accounted changed in 2000?

Dividends are paid from the companies after tax profits, how the ATO and Federal treasury want to account for the franking issue will depend on them, I would guess.


An example of different accounting recently was the 'future fund' earnings.

Rule change helps deliver first surplus in 15 years

A methodology change has enabled Labor to forecast a slender surplus for 2022-23, the first in 15 years. If the same rule has been in force a few years ago, Josh Frydenberg could have claimed bragging rights, too.

www.afr.com

Labor may be on track to deliver the first budget surplus in 15 years, but under the same methodology used to calculate the $4.2 billion forecast on Tuesday, the Coalition would have delivered a $7.2 billion surplus four years earlier.

That is because since the 2020-21 budget and onwards, the net earnings from the Future Fund have been counted towards the budget bottom line

The Future Fund, the nation’s sovereign wealth fund which was created by Peter Costello and Nick Minchin, and seeded with the proceeds from the sale of the final tranche of Telstra, is forecast to earn a net $5.3 billion this financial year, 2022-23.

Without factoring in that revenue, the $4.2 billion forecast surplus would have been a slender deficit of $1.1 billion.

The $4.2 billion surplus, if delivered, would be the first since the 2007-08 budget, the last before the global financial crisis took hold

However, in 2018-19, then-treasurer Josh Frydenberg and then prime minister Scott Morrison restored the budget to balance with a $690 million deficit (a budget is considered balanced if the bottom line is less than $1 billion in deficit or surplus).

Had Mr Morrison and Mr Frydenberg been able to count the net earnings of the Future Fund, which were $7.9 billion in 2018-19, they would have delivered a $7.2 billion surplus rather than a balance.

The decision to count the Future Fund earnings in the budget bottom line from 2020 onwards stemmed from a decision Penny Wong made in 2012 when she was Labor’s finance minister. It was agreed to by the Coalition

 

[IFocus]

Try again


"If its net negative on revenue then its welfare.

That's what happened after 2000."

 

[Smurf1976]

I don't understand how franking credits get paid out of government revenue when no tax has been collected to cover the cost?

By definition a franking credit is a credit for tax paid assuming we're talking about it working as intended.

As a concept it's little different to any other situation where something has been pre-paid based on an estimate or assumption that may or may not turn out to be accurate. Once the true cost is known, an adjustment takes place to either pay the remainder or, if too much has been paid, refund the difference.

In the case of franking credits, the nature of that adjustment in practice is the difference between the 30% rate of tax deducted versus the actual rate of tax payable, since our Income Tax system is somewhat complex in that regard and depends heavily on what other income the individual has.

It makes sense because if I buy shares in Woolworths for example, they can't possibly know what other income sources I have, bearing in mind that for a typical individual shareholder the dividends on their Woolworths shares are likely to be a small portion of their total income.

That's different from an employment situation where it's assumed, and usually true, that someone's job is their largest or even only source of income such that a tax estimate based upon it will be far more accurate. Obviously there are individuals for whom that is not true, and they will be making a substantial adjustment at the end of the financial year in either direction, but for most people it's reasonably close.

Now if someone's income falls below the tax free threshold then it's true to say they're paying no tax. That being so, any tax they did pay, because a company they own shares in or an employer deducted it, will be refunded. In that case the notion that someone receives a refund of all tax paid, and is paying no tax, is absolutely true but it's how it's intended to work as per the law. Arguments for or against aside, that arrangement is a core part of the Income Tax system, the first $18,200 is tax free, and applies to everyone no matter how they earned that income, it's in no way unique to income from franked dividends.

If someone holds shares in what ever company that pays $1000 in dividends, with 30% tax deducted, then they will receive $700 up front plus a $300 credit for tax paid, that being the franking credit.

The franking credit has value in that it's acknowledging tax paid, but that's all it is. It's not a payment from government to the individual, it's simply a formal acknowledgement that tax has been paid. Depending on the individual's total income, they may need to pay additional tax on those dividends, they may have paid the correct amount, or they may have paid too much and will receive a refund. But if they receive a refund, that's a refund of tax paid, it's not a gift from government, and would also apply to any other source of income if too much tax had been deducted.

That's assuming outside super and it's being used as intended (ie not rorting some loophole).

I'll use the analogy of saying that hypothetically I own a petrol station and you turn up with a particularly large vehicle. As per my policy, I require pre-payment before allowing you to pump an abnormally large amount of fuel. You pay me $2000 which is a reasonable estimate, in practice you pump $1700 worth of fuel, and I hand you back $300. That doesn't mean I've given you $300, all I've done is hand you back your own money that was surplus to your actual fuel purchase. That I asked for the $2k up front being as an anti-theft measure to protect myself from the risk of you driving off without paying, and that's essentially the same reason the ATO tries to grab tax up front, it makes fraud somewhat harder when you've got the money first. Downside is it means having to administer a system to refund excess payments.

 

[IFocus]

Now if someone's income falls below the tax free threshold then it's true to say they're paying no tax. That being so, any tax they did pay, because a company they own shares in or an employer deducted it, will be refunded. In that case the notion that someone receives a refund of all tax paid, and is paying no tax, is absolutely true but it's how it's intended to work as per the law. Arguments for or against aside, that arrangement is a core part of the Income Tax system, the first $18,200 is tax free, and applies to everyone no matter how they earned that income, it's in no way unique to income from franked dividends.

This became the case after 2000 and its not really sustainable, I and assume SP get franking credits yet I pay no tax as income is from super in pension phase so for us its welfare. It a total net negative to revenue just a hand out.

If a handout is required due to poverty or other fine but that's not the case here.

I have no argument for franking credits being paid to avoid double taxation that makes sense being paid by the government when no tax is paid makes no sense IMHO.

 

[sptrawler]

This became the case after 2000 and its not really sustainable, I and assume SP get franking credits yet I pay no tax as income is from super in pension phase so for us its welfare. It a total net negative to revenue just a hand out.

If a handout is required due to poverty or other fine but that's not the case here.

I have no argument for franking credits being paid to avoid double taxation that makes sense being paid by the government when no tax is paid makes no sense IMHO.

Well that is easy, make the companies pay two types of dividends, one franked, or a second which is unfranked and 30% greater than the taxed dividend.
Why should I get a smaller dividend than someone who pays tax? Even Twiggy gets the first $18k tax free, then he only pays 16% from $18k-$45k,.

If you want to talk about welfare, maybe we can have negative gearing only being able to be offset against the income recieved from the geared assett, not against a persons PAYG tax, now that isn't sustainable. Someone borrows $5m and only pulls $30k rent, but gets a $470k tax offset, like that's not welfare.

Or maybe CGT on the PPR, that is a form of wealth preservation for the rich, which would net a lot more tax than franking credits.
Why not include the value of the PPR in the assett test for the pension? That is another form of welfare for the rich which is probably costing a fortune .
Why not introduce an inheritance tax, so that the person who saved and earned their money gets to enjoy it and it is taxed upon death where it is passed on to others who didn't earn it?
I guess you can find endless examples,if you are serious about equality.
It depends whether you want to encourage people to invest and save for their old age, so that they don't draw a pension, or you want to discourage them from investing in shares and invest in their PPR and then draw a pension instead, as some do. That's a form of welfare also, don't you agree?

 

[sptrawler]

This became the case after 2000 and its not really sustainable, I and assume SP get franking credits yet I pay no tax as income is from super in pension phase so for us its welfare. It a total net negative to revenue just a hand out.

If a handout is required due to poverty or other fine but that's not the case here.

I have no argument for franking credits being paid to avoid double taxation that makes sense being paid by the government when no tax is paid makes no sense IMHO.

I'll pose another question, who is getting the most welfare, a married pension couple living in a $2.5m house overlooking the ocean or river, with $500k in the bank and getting a full pension of $46k handout a year plus perks.

Or a married pension couple living in a $400k unit in the suburbs, with $1.2m in shares getting $10k in franking credits and $40k dividend but not qualifying for any pension or perks.

The funny part is, the Government is trying to encourage pensioners to sell their big house and put the money into super. Well you have proven that is just another scam, I bet you wont do it. Lol

As I said maybe the situation should be looked at in a holistic way, rather than one dimensional.
What do you think?

 

[IFocus]

I'll pose another question, who is getting the most welfare, a married pension couple living in a $2.5m house overlooking the ocean or river, with $500k in the bank and getting a full pension of $46k handout a year plus perks.

Or a married pension couple living in a $400k unit in the suburbs, with $1.2m in shares getting $10k in franking credits and $40k dividend but not qualifying for any pension or perks.

The funny part is, the Government is trying to encourage pensioners to sell their big house and put the money into super. Well you have proven that is just another scam, I bet you wont do it. Lol

As I said maybe the situation should be looked at in a holistic way, rather than one dimensional.
What do you think?

I think you are trying to justify getting a handout.

The above is pointless, nothing to do with double taxation.

 

[sptrawler]

I think you are trying to justify getting a handout.

The above is pointless, nothing to do with double taxation.

You were talking about sustainability and infered welfare of the franking credits. Lol

I can move the debate on, to what happens when the pension couple who have been receiving their $10k franking refund pass away and the people in the $2.5m home getting a full pension pass away and the tax implications, from both scenarios.

That's even more skewed toward the welfare handout to the rich property owners estate.
That's why Bill lost credibility, there isn't a moral compass involved, just a nasty attack on those at the bottom. Lol that was Bills problem, defend the rich and attack the poor.

That's why Labors support base is now the elites, the blue collar has deserted them, they're the ones on the less than 30% tax bracket that you want to tax at 30%. Lol

Do I really have to post up the demographic map of the last election result.

SIt on the verandah and watch the sunset over the ocean, while sipping your wine mate. Lol enjoy, Albo's going to get back in.

He may even stay in if he isn't as nasty as Bill, or maybe some others.? Gina and Twiggy send their best wishes, they were still going to be able to claim their full franking credit against their tax free $18k threshold. Lol
Same as your mates in the Industry funds, they were going to keep their franking credits apparently.

 

[Knobby22]

I thought the problem was not franking credits , which were brought in by Labor but abuse of franking credits in the low tax environment of Superannuation. Where a Mr Wilson and certain others had arranged their assets so they claimed $100s of millions of franking credits every year to the detriment of Australia.

A better solution than setting a maximum amount allowed for franking credits would be to limit the maximum amount allowed in Superannuation. This has been done but possibly cannot be backdated.?