Exposed: Cost of Labor's Super Changes

There’s new and clear evidence of the devastating impact that Labor’s policy to remove franking credits will have. A growing number of investment companies are moving now to downscale their shareholdings and pay early dividends to their investors.

These decisions are an attempt to lessen the effect of Labor’s policy and ensure investors on low incomes can retain some of their expected income. Sadly, it’s also a sign that the market expects a Labor election victory this year.

The Australian reported this morning:

In the last week the nation’s biggest listed investment company Australian Foundation Investment Co dumped $120 million worth of shares in BHP and Rio Tinto and paid an unscheduled dividend to beat the stripping of cash refunds for excess dividend imputation credits by an incoming ALP government.

It has been joined by other investment companies Mirrabooka and Amcil that have put dividends into the hands of its shareholders to ensure the franking credits are passed on before their value is greatly diminished by the ALP scheme.

In our submission to the Parliamentary Inquiry last year, Advance Australia warned: “It is an obvious and logical conclusion that this policy will result in significant behavioural changes.” We are now witnessing these significant changes even before the policy is implemented – which is testament to just how much this policy will hurt.

Investment companies are doing the right thing by their investors in attempting to maximise returns ahead of Labor’s tax changes.

As the Chief Executive of Mirrabooka, Mark Freeman, said:

“The feedback so far is if they (ALP) change the policy then it will take affect from July 1 this year, so if they get that through as policy then from July 1 you will no longer get a refund cheque and so if you put out the special dividend this financial year people will still be able to have that as part of their return and potentially a refundable credit,’’ Mr Freeman said.

“So get it (the dividend) to them now, that is a key component of this result, and we think this policy is very grossly unfair for investors and trying to shift the playing field in favour of managed funds over self-managed superannuation.

“We are feeling the potential pain of people if this rule comes in, and so let’s try to help them out now.’’

At Advance Australia we applaud this forward-thinking – anything that will help low and middle income retirees set to be whacked by this change is welcome.  Of course, the best way to ensure Labor’s unfair retiree tax is never implemented is to make sure Bill Shorten does not become Prime Minister.

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