The SMSF Association welcomes the decision by the House of Representatives Standing Committee on Economics to have an inquiry into the implications of removing refundable franking credits.
The Labor Party is proposing to introduce this measure if it wins government, a move that would overturn a principle that took effect on 1 July 2000 and on which many SMSFs in retirement phase have used to build their investment and income strategies.
Economic Committee Chair Tim Wilson, in announcing the inquiry, said there had been “legitimate” community concern about proposals to remove cash refunds for their full allocation of credits for individuals and superannuation funds, adding that it amounts to a tax on the savings of retirees.
SMSF Association CEO John Maroney says the organisation remains “resolutely opposed” to Labor’s proposal, and we will use this opportunity to make a detailed submission to the inquiry detailing why we believe it is “flawed policy”.
“It’s our stated belief that this proposal will affect more than one million Australians either saving for or in retirement and other purposes, with our calculations showing it will cut about $5000 of income from the median SMSF retiree earning about $50,000 a year in pension income.
“The notion that this proposal will only affect the wealthy is simply wrong. An analysis of ATO and Treasury data shows it is those on modest incomes who will be most affected, refuting Labor’s argument that the proposal will only target the wealthiest 10% of SMSFs.
“The most likely consequence if this proposal sees the light of day will be to substantially damage the lifestyles of retirees who have prudently saved and are carefully drawing down on their retirement savings.
“It will also undermine confidence in the system, especially when considered in conjunction with the enormous changes introduced on 1 July 2017, having the deleterious effect of sending many retirees back to the drawing board to rethink their retirement income strategies.”
Maroney says that the inquiry offers an important opportunity for retirees and savers that will be negatively affected by the Labor proposal to voice their concerns to the House of Representatives committee.
Since Labor announced its proposal in March this year, the Association has joined forces with eight other like-minded organisations to form the Alliance for a Fairer Retirement System (www.fairerretirement.com.au) with the primary aim of opposing this initiative.
You can read The SMSF Association’s policy position on the proposal here.