Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 303

Compare the pair: Coalition v Labor super

I love an election, particularly a federal one. It’s the quintessential characteristic of democracy in action (assuming no undue influence from foreign governments). Any election is about comparing opposing parties’ policies. So let’s compare Labor's proposals to the current super rules, not only as input to our voting decisions, but as a good reminder on ways to put more into superannuation.


Non-concessional contributions cap

Current law

You can make 'after tax' or non-concessional contributions (NCC) of up to $100,000 if you qualify and have a total superannuation balance (TSB) of less than $1.6 million at the prior 30 June.

If you are under 65, it is possible to access the ‘bring-forward’ rule and make NCCs of up to $300,000 over a fixed three-year period, provided your TSB is no more than $1.4 million at the prior 30 June. If your TSB is between $1.4 and $1.5 million you can make NCCs of up to $200,000 over a two-year fixed period and if your TSB is between $1.5 and $1.6 million, your NCC is limited to the standard annual limit of $100,000.

Labor policy

The standard annual NCC cap of $100,000 will be reduced to $75,000. The ‘bring-forward’ rule will then change to allow a one-off (after-tax) contribution of $225,000 for an individual, or up to $450,000 for a couple to a maximum of $225,000 each.

The cut in the cap reduces the ability to make a ‘one-off’ contribution to super, which can come from the proceeds of selling investments, an inheritance, a redundancy payment or some other means.

Assuming Labor wins on 18 May, it will be a further step down in the ability to put money into superannuation.

Concessional contribution cap

Current law

The 'before tax' or concessional cap (CC) for the 2018/19 financial year is $25,000 for an individual. There is no higher cap for older Australians. The cap is indexed and increased in amounts of $2,500. The cap will not increase for the 2019/20 financial year.

Labor policy

Labor has not announced any changes to the concessional cap, however, it has announced changes to the catch-up concessional cap rules, refer below.

Tax deductions for personal superannuation contributions

Current law

You can claim a tax deduction for personal superannuation contributions providing you have notified the fund of your intention and the fund has acknowledged your notice in writing. The maximum amount for personal superannuation contributions, including any employer or salary sacrifice contributions, is $25,000 without incurring a tax penalty.

For example, if your salary for the financial year is $100,000, your employer would be required to make a 9.5% super guarantee contribution of $9,500, allowing you to make a personal tax-deductible contribution of up to $15,500 ($25,000 – $9,500).

Labor policy

Tax deductions for personal superannuation contributions will be more restricted and is likely to revert to the previous rules. However, more detail of the announcement is required to work out who may be affected. The previous rules allowed a deduction for personal contributions if less than 10% of your total adjusted taxable income came from employment sources.

Catch-up concessional contributions

Current law

You may be eligible to claim personal ‘catch-up’ CCs if you meet certain conditions. Whilst the measure started in the current 2018/19 financial year, the first year that a person can apply any ‘catch up’ amount is the 2019/20 financial year.

The ‘catch up’ contribution is the difference between CCs you make plus those that are made for you and your annual CCs cap of $25,000. You can carry forward the shortfall for up to five years and can claim a personal tax deduction up to the catch-up amount if your TSB as at 30 June in the previous financial year is below $500,000.

As an example, if you earnt $100,000 for the 2018/19 financial year and your employer contributed the compulsory super guarantee contribution of $9,500 (9.5% of $100,000) you would have an unused catch-up CC of $15,500 ($25,000 - $9,500) which you can carry forward for the next five years.

Assuming your TSB at 30 June 2019 was less than $500,000, your CC cap for 2019/20 would be $40,500 (i.e. the standard $25,000 concessional contributions cap for the income year plus the carried forward amount of $15,500 from the previous income year).

Labor policy

Catch up contributions will be abolished as they are considered to provide an unfair advantage to upper income earners.

Division 293 high-income super contribution threshold

Current law

If your adjusted taxable income exceeds $250,000, you are required to pay an addition 15% tax on CCs up to the standard cap amount of $25,000, which means a total tax rate of 30% after the 15% contributions tax deducted by your super fund.

As an example, if you had an adjusted taxable income of $275,000 and your employer contributes $25,000 to your super fund, you would end up with an additional tax bill of $3,750 ($25,000 x 15%). However, if your adjusted taxable income was $260,000 and CCs of $25,000 were made to your fund, then only $10,000 would be taxed at the additional 15% ($1,500).

Labor policy

The high-income superannuation contribution threshold will be reduced to $200,000.

[Register for our free weekly newsletter and access to our special investment ebooks.]


$450 superannuation guarantee threshold to be phased out

Current law

Super guarantee is not payable by an employer for employees who earn up to $450 in a calendar month.

Labor policy

The $450 monthly threshold is to be progressively reduced in increments of up to $100 each financial year between 2020 and 2024. The intention of this change is to benefit low income earners, casual employees and those in part-time employment.

Superannuation guarantee (SG) to be paid on the government’s paid parental leave

Current law

Superannuation guarantee contributions are not required to be paid by your employer if you are receiving paid parental leave.

Labor policy

Superannuation guarantee contributions will be paid on amounts you receive under the federal government’s paid parental leave scheme. At present, $719.35 is paid weekly for 18 weeks if you are female and meet a work test and earn less than $150,000 per year. The amount paid for the super guarantee will be 9.5% of $719.35 ($68.34 weekly to a maximum of $1,230.08 over 18 weeks).


Direct borrowing by superannuation funds and limited recourse borrowing

Current law

Your SMSF can borrow to invest as long as the loan arrangement and the asset being acquired satisfy strict rules.

Labor policy

Limited recourse borrowings will cease, however, those in place prior to the law changes will be grandfathered.


Restriction on amount of fund income that can be claimed as exempt current pension income (ECPI)

Current law

From 1 July 2017 a transfer balance cap (TBC) of $1.6 million was introduced on the amount that can be transferred to a ‘retirement phase income stream’. This cap effectively restricts the amount of ECPI that a fund can claim.

Labor policy

Prior to the introduction of the TBC, Labor announced a policy to limit the amount of ECPI that a fund could claim to $75,000 per member. It is unclear whether Labor still intends to introduce this policy now that the TBC has been introduced.


Here is a brief summary of three other differences to complete the picture.

1. Dividend imputation

Current law

Individuals and superannuation funds are entitled to a refund of franking credits, if the franking credits plus any PAYG tax paid by the individual or fund exceeds their tax liability.

Labor policy

Refunds of excess franking credits that exceed tax liabilities will cease for some taxpayers. Generally, the policy will apply to most individuals, SMSFs and some larger superannuation funds. As part of Labor’s ‘pensioner guarantee’, SMSFs which had at least one member who was a welfare recipient on 28 March 2018 are exempt from this policy.

2. CGT discount

Current law

A discount of 50% applies to capital gains made on CGT assets held by an individual for at least 12 months. A one-third discount applies to capital gains made on CGT assets held by a superannuation fund for at least 12 months.

Labor policy

It is proposed that the 50% discount that applies to capital gains made by individuals on CGT assets held for at least 12 months is halved to 25% for CGT assets acquired from 1 January 2020. There will be no change to the one-third discount that applies to superannuation funds.

3. Taxing discretionary trust income

Current law

Distributions from discretionary (family) trusts are taxed depending on the personal tax rate of the beneficiary.

Labor policy

Labor intends to introduce a minimum tax rate of 30% to discretionary trust distributions aimed at reducing tax minimisation and artificial income splitting. This should not affect SMSFs, as trust distributions received are generally from unit (fixed) trusts, not discretionary trusts. Current law treats distributions from a discretionary trust to an SMSF as non-arm’s length income, taxing the distribution at the relevant top marginal tax rate.

We await the outcome of the May 18 federal election to see which party will form government. Regardless of the election outcome, there will still be the issue of the make-up of the senate, which determines, in most cases, the successful or otherwise passage of legislation.


Mark Ellem is Executive Manager, SMSF Technical Services at SuperConcepts, a sponsor of Cuffelinks and a leading provider of innovative SMSF services, training, and administration. This article is general information only and does not consider the circumstances of any individual.

For more articles and papers from SuperConcepts, please click here.

Paul B
May 16, 2019

I would be voting to protect my retirement income stream and not to change the goalposts yet again!

Jennifer thorn
April 30, 2019

when your grandchild asks “how did you vote in the climate election?”
will you answer “I voted to boost my superannuation” ??

May 01, 2019

Lucky the vested interest groups are being diluted with a further addition of 800,000 young voters who have no interest in the propaganda being pedalled by the Lobby groups.

May 01, 2019

Australia's carbon 'foot print' is ~50 tonnes per square kilometre per year - similar to Brazil and Canada.

50 times greater are Japan, Germany, United Kingdom of England and Scotland.

10 - 20 times greater are USA, China and India.

If all the world were like Australia there would be no problem with carbon dioxide emissions.

Australia's part in global carbon dioxide emissions is immeasurably insignificant as would be any Australian abatement.

Australia can rationally concentrate on adaptation rather than abatement - a climate taker not a climate maker.

Don Macca
May 17, 2019

The most equitable way to measure a carbon "footprint " is per person. Please present your data on a per person basis.
Yes Australia’s carbon dioxide emissions is immeasurably insignificant as a total, when compared to totals for USA, China
, Japan etc.
I want whatever party is in power to play our part in reducing our carbon "footprint" Perhaps Labor's policy goes too far?

May 17, 2019

"The most equitable way to measure a carbon “footprint ” is per person.":

Carbon dioxide might be largely irrelevant to global warming and to climate change.

A very modest change in global humidity or cloud cover could have a larger effect and not necessarily be anthropogenic.

The biggest recent global warming and climate change was the end of the latest ice age. Carbon dioxide emissions from camp fires?

"based on the galactic cosmic rays (GCR) changes and space dust amount. This model gives correlation r2=0.972"

May 01, 2019

Your calling it "climate election" doesn't make it so. It's an election about all sorts of issues, climate being one.

I live in Albanese's electorate, so voting House of Reps LNP would a complete waste of time, were I planning on doing so just to benefit my super, which I wasn't. I will be voting for someone centrist in the Senate, who opposes Labor's mooted superannuation changes, but who supports much more rigorous action on climate change, if I can find such a party. If that's OK with you?

I hope Labor's proposed super changes crash and burn in the Senate.

Nothing is so binary as you make it out.

Plus I have no children, and thus no grandchildren.

April 29, 2019

Not a fair go from Labor.

Labor’s intention to cease refunding excess franking credits is grossly unfair to low income earners whose income is mostly derived from share dividends. Refunding to them of some of the franking credits paid on their behalf is not a concession or a tax loophole but an appropriate refund to them of excess tax paid, in the same manner as is done in the PAYE system. If these low income earners lose their refunds of excess franking credits they will be paying tax at the rate of 30 cents in the dollar for every dollar of income, a far higher tax rate than is appropriate for their low income.

Take the example of a retired couple each earning an income of $30,000 entirely from fully franked dividends in Australian companies in which they each have a portfolio of $500,000 worth of shares which they hold directly, not via a superannuation fund. They are not pensioners as their assets (predominantly their shares) are too great for them to be eligible for the pension and, like many people, they prefer to be self sufficient anyway.

These people are each required to pay $2,242 in income tax in accordance with the 2018/19 tax rates. The companies in which they hold shares have paid tax totalling $9,000 on behalf of each person (30% of $30,000) so this financial year they will each receive a refund of $6,758, as they would if they were wage earners earning $30,000 income and their employer had paid PAYE tax of $9,000 for each of them.

Under the Labor Party proposal our couple would not receive any refund for the excess tax paid on their behalf so they would each be paying $9,000 tax, although the income tax rates show that for their income they should each have to pay only $2,242. But if they had earned the same income as salary or wages they would only have to pay the $2,242! The $9,000 tax our couple would pay under the Labor policy is 30 cents in the dollar for every dollar of income. The income tax scales show that taxpayers should only have to pay tax at a rate as high as this, averaged over every dollar of income, when their income reaches $180,000! IS THIS LABOR’S IDEA OF A FAIR GO!!!

This is not an unrealistic scenario. There are many many people in a situation like this! If put into practice, Labor’s policy will unfairly tax any person who is not a superannuant or a pensioner and whose taxable income is largely or solely derived from Australian shares and is below $180,000. It will be more unfair to those on lower incomes than those on higher incomes.

April 29, 2019

"income of $30,000 entirely from fully franked dividends" ... "each required to pay $2,242 in income tax":


- $2,242.00 [income tax]
+ 1,473.75 [SAPTO]
+ 445.00 [LITO]
+ $200 [LAMITO]
+ $9,000 [franking credit]
+ $8,876.75 [refund]
+ $21,000.00 [cash dividend]
+ $29,876.75 [net income]


- $2,242.00 [income tax]
+ 1,473.75 [SAPTO]
+ 445.00 [LITO]
+ $200 [LAMITO]
+ $9,000 [franking credit]
+ $8,876.75 ['excess' franking credit]
- $8,876.75 ['Fair Go' tax]
+ $21,000.00 [cash dividend]
+ $21,000.00 [net income]

May 16, 2019

I'm sorry, you lost me at "low income earners" and "now consider a retired couple with $1M".

Compared to the average Australian, they are very asset rich, and I don't believe it's fair that someone with $1M in liquid assets should receive additional funding from the government in the form of a franking refund. I would much rather see this refund redistributed through the system to someone who is genuinely struggling to make ends meet, rather than just someone who wants to live perpetually from their assets without selling anything.

This absolutely screams of entitlement to me, this fictional person has had numerous tax rulings in their favor from successive governments, and now is the loudest minority when something doesn't go their way. There are other ways to change the retirement investments that will still lead to sustainable outcomes, these people should be looking into this rather than relying on a bonus from the government to help them retain their asset rich lifestyle.

May 16, 2019

Perhaps they are worried about their next 30 years with increasing medical and living costs rather than a 1 year view?

"There are other ways to change the retirement investments that will still lead to sustainable outcomes"

Care to nominate any that are equivalent in risk and return compared to an investment in a blue-chip Australian bank generating ~7%? You seem to be certain that you know of some.

How would you cope with the income you've relied upon for the last decade suddenly being reduced by 30%? At least for a person in the workforce they can look to up-skill and get a better paying job, what's your plan for a 75 year old?

May 16, 2019

Matt, in defence of most of the responders in this article, between self interest and the truth, most people will invariably choose self interest.

May 16, 2019

"I’m sorry, you lost me at “low income earners” and “now consider a retired couple with $1M”. ":

In the here and now, $1M at 1% real interest yields $10k / y - and no Age Pension with that.

Then at ~85 $500k per person age care capital cost.

Compare with Age Pension of ~$36k / y - requiring no effort to save capital or pay tax.

Nicholas Meier
April 28, 2019

While some of Labor’s superannuation policies sound fair, abolishing the catch up concessional contributions is a terrible idea.

This will particularly disadvantage women who may be returning to the workforce after having time off to look after their children, or people who move from a lower paid job, where they were unable to afford to make concessional contributions, to a higher paid role.

I have no idea why they would get rid of personal concessional contributions either (apart from revenue raising); this measure made the whole process much easier and put the self-employed and employees on the same footing. Allowing personal concessional contributions gives people greater choice over how they contribute.

April 28, 2019

"why they would get rid of personal concessional contributions":

Personal concessional contributions would allow most individuals to acquire just enough super over 40 years at modest growth rates to avoid dependence on welfare.

April 27, 2019

discuss all the details you like,
but the simple fact is that Labor does not want people to get wealthy, as it is the poor who are more likely to vote for them,
so it's in their best interests to keep people poor.

Nicholas Meier
April 27, 2019

Surely one of the biggest issues with the current system is the interaction between superannuation and non-superannuation assets.

An individual can be in receipt of healthy income stream from their superannuation (non-assessable non-exempt income) and receive a refund for excess franking credits on shares held outside super because they have a low taxable income.

Statistics around taxable income fail to recognize that payments from superannuation are non-assessable non-exempt income.

Either way, changes to franking credits should be grandfathered; people have put their investments in place under existing rules and should not be disadvantaged for doing so.

April 27, 2019

"superannuation and non-superannuation assets",
"payments from superannuation are non-assessable non-exempt income":

Super retiree ('pension') account assets are capital. The withdrawals from retiree accounts are withdrawal of capital - like withdrawals from a bank savings account - as witnessed by there being no upper rate limit on withdrawals. The entire balance can be withdrawn in a single transaction.

Just as withdrawals from bank accounts are capital and not income, so withdrawals from super retiree accounts are capital not income - and thus not assessable for income tax.

It is the super fund retiree accounts income which is non-assessable, exempt, 0% taxed income - within the super fund - separate from the income of the retiree which is assessable and non-exempt, possibly taxed at 0% or more.

Nicholas Meier
April 28, 2019

So an income stream or a lump sum received by a retiree after turning 60 is classified as what type of income?

And yet the taxable component of a lump sum received by a member between 60 and preservation age is assessable income.

Nicholas Meier
April 28, 2019

But someone over 60 in receipt of an income stream, that income is NANE? Is it not? As per ITAA97 301.10

April 28, 2019

"income stream from their superannuation":

'Income stream' is yet another super misnomer. A more apt term would be 'withdrawal stream'.

'Assessible retiree income' is from non-super investments and 'Untaxed elements' from public service super (to the best of my understanding).

Nicholas Meier
April 28, 2019

I would say withdrawal stream is a misnomer, as both lump sums and pensions are classified as income under taxation law; being NANE income after age 60 for the tax-free component and the taxed element of the taxable component, and the tax-free component of a superannuation benefit paid to someone between preservation age and 60 is still NANE income.

April 28, 2019

ANY withdrawal from a super fund after the age of 60 is tax exempt, following Costello’s changes in 2007. That applies to both pension or lump sum withdrawals and it applies to withdrawals from an accumulation and pension account alike. That withdrawal doesn’t even appear on a personal tax return.

That tax treatment should not be confused with the tax paid by the super fund. That has remained unchanged since Keating introduced compulsory super in 1992.

April 28, 2019

'If you are 60 years or over when you receive a superannuation benefit, the benefit is not assessable income and is not * exempt income.'

If super benefits are neither assessable income nor exempt income than what type of income could they be other than not income?

Nicholas Meier
April 29, 2019

April 29, 2019


Thanks. How is NANE other than a synonym for capital / principal?

Tax free component (after tax contributions) : 82-10A(2) The tax free component of the payment is not assessable income and is not exempt income.

Taxable component (before tax contributions): 82-10A(3) The taxable component of the payment is assessable income.

Nicholas Meier
April 30, 2019

Because NANE income is statutory income or ordinary income that has been made non-assessable non-exempt by law.

April 30, 2019

"NANE income is statutory income or ordinary income that has been made non-assessable non-exempt by law.":

Good clarifying find.

Are 'non-concessional' (after tax) contributions defined as NANE? Defining thus what is clearly capital would seem inane.

'Concessional' (before tax) contributions can be viewed as having components of capital (the contribution less the tax the contributor would have paid if not contributed) and components 'untaxed' (due to the difference between the contributor's tax rates through time and the 'concessional' tax rate).

The earnings once taxed in the fund have components like 'concessional' contributions.

However, under current law, due to being 0% taxed, the NANE are NANE for an instant then, in the hands of the recipient, 'transmogrify' to capital.

A taxable component is income but once taxed undergoes it's 'transmogrification' to capital in the hands of the recipient.

Nicholas Meier
May 02, 2019

Contributions to a super fund will either be included in the fund’s assessable income or not included, based on the nature of the contribution

(E.g. A NCC made by a member to their account is not included in the fund’s assessable income, but an SG contribution will be),

When it’s withdrawn, it will be assessable or NANE income based on things like the age of the member, its status (e.g. tax-free component, taxed component taxed element).

April 27, 2019

Which is exactly what Chris Bowen said but, then stubbornly refuses to consider grandfathering. And says, instead, people (even retirees) can readjust their investment strategies to make up the income elsewhere. Given, we may be looking at 0% interest rates, it's going to be tough.

John Wilson
April 26, 2019

Labor's proposal to impose a 30% tax at trust level on distributions from family trusts, which is intended to eliminate tax dodging by making distributions to low tax rate beneficiaries. Whether or not that is appropriate is a political value judgement.
However, it will disadvantage genuine taxpayers whose taxable income is less than $37k who would otherwise pay tax at their lower marginal tax rate.
Also, the tax rate would be more than the legislated tax rate on small companies - which would encourage switching from trusts to companies (albeit with a loss of discount on CGT).
Finally, Labor has been silent on whether or not their proposed tax on trusts would be franked. If not, that would be blatantly unfair.

April 27, 2019

“Disadvantage genuine taxpayers”. That is an overarching spin. I guess the couple age pensioners will no longer get their $3952 distribution each financial year. Also cousin Tim who is on Austudy won’t get his $11362. Also little Jimmy, little Johnny and little Paul won’t be getting their $416 each. I haven’t even mentioned Aunty Joan who is on a DSP or Auncle Tony who is on Newstart. What a dilemma for the trustee and the accountant.

April 27, 2019

Gary, on your list you forgot about distributions to bucket companies. No wonder the FIRE industry groups have mobilised for this election.

May 16, 2019

Gosh Gary, $3852? $11362? $416? Doesn't exactly sound like the road to riches. Wow a trust can distribute investment incomes to low paid dependents - what a glorious way to get rich. Imagine that I could distribute $416 to a dependent child and save a whopping $195 in tax - clearly in just a few years I'll be a billionaire. Of course if you put exactly the same amount of income earning assets directly in the child's name, without a trust you'd avoid the 30% trust tax ...
Trusts aren't magical.

May 17, 2019

Harry, your maths is a little off. You need to learn about the use of bucket companies. Personally, my multi entity structure results in a very low net marginal tax rate. It has been a good ride to build my wealth on very accommodating tax settings.

May 17, 2019

Rick, it's easy to say my maths is off, pity you provided no proof.
The same applies with your claim regarding bucket companies.

A bucket company just provides a mechanism for "excess" income to be placed in a company vehicle. That company vehicle pays tax at 30%. So thee is no escaping paying tax.
If that company revenue is distributed later, it will go to recipients with 30% franking credit which the person then needs to gross up and pay their marginal rates.

The same can be achieved by putting excess assets directly into a company structure.
The only benefit of the trust is lower accounting costs.

From reading your comment I expect that you have no experience in any of these matters and have no trust/bucket company or any other vehicle but are just continuing to play on the incorrect myths surrounding trusts.

Graham Hand
May 17, 2019

To Rick and Harry, we have asked a lawyer to provide an article on this, so let's see what he says instead of trading barbs. G

June 21, 2019

Graham, has the article from the lawyer been published yet?

Graham Hand
June 22, 2019

Harry, thanks for reminding me. We had an early draft but forgot about it. I'll follow up. G

Glenn H.
April 26, 2019

Chris Bowen and Bill Shorten ,both won't answer whether super fund accounting fees and ATO levies on SMSF's will come out of "non refundable franking credits" or will they further reduce the net income of lower income self funded retirees .
MJ why are Labor proposing to create different classes of retirees who receive franking credits ? Why is a part pensioner more entitled than a fully self funded retiree to a refund ?

April 26, 2019

I know I have made this information available previously but it seems certain readers blindly accept the statements of their political persuasion.

Now, this is based on figures released by the Parliamentary Budget Office.

1] 91.5% of people who receive refunds from excess franking credits have taxable income below $43,200.

2] The average franking credit for those earning less than $43,200 is just $1,360.22.

3] if fully franked the dividend generating that franking credit is $3174.

4] Among individuals, 80% of the benefits go to 95% of the affected taxpayers.

5] Among the SMSF's all but 10% of the funds have balances below what is allowed by both political parties as the maximum amount to draw pensions for 2 people. [ its actually less than 10% but the value is unclear from the PBO tables].

The claim about the numbers of large SMSF's is erroneous based on the information provided to the recently completed review by the Economics Committee on this policy.

Importantly, this policy is not some loophole - any taxpayer has the ability to use the system.

Yes - there is a need to do something with our tax system - but this is a piecemeal method to the problem aimed at helping a key constituency [Industry super - some could even suggest there is a conflict of interest] and targeting people who may not be ALP voters.

April 29, 2019

“1] 91.5% of people who receive refunds from excess franking credits have taxable income below $43,200.”

Unsurprisingly those wth taxable incomes above $43,200 are likely to pay tax and so not get an excess franking credit refund.

The question is what is the gross income of those receiving the credit? It is possible to be a retiree who earns double the median salary yet have a taxable income below $43,200.

Which is why those defending the current policy talk about taxable salary as though that is the same as gross income.

April 29, 2019

"It is possible to be a retiree who earns double the median salary yet have a taxable income below $43,200.":

It is not. Their taxable income would be 2 * ~$55,000 = ~$110,000.

It is possible to be a retiree who earns nothing and withdraws double the median salary from their bank account or their super account and yet have an income, taxable or otherwise, of $0.

The earnings of their super accounts are taxed separately from their personal earnings.

April 29, 2019

No, Dudley, they could withdraw $100k from Super tax free and then have $10k earnings outside super. They would be taxed as if they earned $10k not $110k.

Those super earnings are low taxed, going in and out. Let’s not pretend that a $110k income makes them poor.

April 29, 2019

"could withdraw $100k from Super tax free":

Of course, it is not income and, therefore, not taxed.

Withdrawal of super 'after tax contributions' are clear cut case of withdrawal of capital and thus not income and not taxed.

Super 'before tax contributions' and super earnings are taxed at the rates specified for accumulation and retiree accounts.

It will be bad day when governments introduce a withdrawal tax for already taxed savings whether from a super fund or a bank or the like.

"Let’s not pretend that a $110k income makes them poor.":

Having savings of $110k makes them poor - if that is all they have. Seniors would qualify for welfare.

April 30, 2019

Dudley, the super earnings after retirement is not taxed. Withdrawals are income, untaxed income. Then further dividends outside super can give a tax rebate.

It is fine for super assets to not be taxed but generous for super income to be untaxed.

To have retirees earning incomes in and out of super well above the median wage entirely untaxed is a very generous program. To expect a welfare cheque back from the government is excessive.

The fair thing would be to means test it. Super to cover retirement but pay your fair share of tax.

May 01, 2019

Allan, I am not sure where you are going with this but I am happy to be educated.

As I understand it, Super Funds are taxed entities and sort out their tax obligations at whatever their tax rate is. Your withdrawal (as a quite different taxation entity) from Super is after all Superannuation tax obligations are determined in the fund and resolved between the fund and the ATO as the collector of taxation.

Accordingly, that taxation rate on pension mode Superannuation accounts might be 0% however the withdrawal made is not income. Here I am with Dudley, the withdrawal is a withdrawal of capital from the Super Fund with all tax obligations already met by the Super fund.

Am I missing something or is it the fact that the pension mode taxation rate is 0% that is confusing folk ? Would you argue differently if Pension mode taxation was 1% or 2% or 3% or .....

April 26, 2019

Obviously there are a lot of misunderstandings over these discriminatory and shortsighted Shorten proposals. The majority of the people this will affect are not high income earners. I have clients who are not eligible for Centrelink, who will lose 20% of their income and are below the poverty line, most of whom are women. Interesting to note that these proposals will not affect Bill Shorten's pension too much when he retires but of course he won't be below the poverty line. Talk about kicking the weaker members of our society when they can't fight back.

April 26, 2019

Franking credits is not the number one issue of the campaign. It has been made the number one issue by the government which rules for the interests of the wealthy because the greed from this end of town surpasses all common sense and fairness.

We'll be losing some franking credit income but it won't be the end of the world. Of course the well to do want their handouts from the public purse and the fact that most of the benefits of franking credits go to high income earners rarely gets a mention.

You may want to get over this one and try to come to grips with the sort of campaign the government is running. I don't understand how anybody can possibly support such a crooked party compete with its crooked media tycoons running the propaganda. Did you hear about the stunt from The Telegraph in Abbott's electorate last week? Shameful.


April 26, 2019

MJ, by the tone of your comments I can only assume you do not understanding the concept of refund of excess franking credits. The policy was supported and endorsed by Labor when introduced by John Howard.

I cannot understand how Labor can argue that refunds are being made when tax "has not been paid", yet proposes to make refunds to some sectors such as churches, unions, charities and those who received a government pension before 28/3/18. It does not make sense.

"Franking credits" are simply a statement of tax that has been paid (by the company on behalf of the shareholder), and are added to the shareholder's income. If the shareholder is in a higher tax bracket (>30%) then additional tax is paid, if in a lower (including a zero) tax bracket, then a refund of the overpaid tax is made. This is only logical and fair.

April 26, 2019

"Franking credits" ... "the wealthy":

The most affected will be low taxable income direct shareholders. Super fund members high and low income will be proportionately equally affected.

"handouts from the public purse":

Franking credits cost government nothing - they are credits for income tax paid by the shareholders companies and imputed by ATO to the shareholder. Just as wages tax credits (PAYG) cost government nothing - they are credits for income tax paid by the employer and imputed by ATO to the employee. Both pre-paid tax - sometimes over pre-paid.

April 27, 2019

Dudley, your post validates MJ’s statement. You have been blinded by the propaganda machine. Good luck on the 18th of May champ.

Graeme Bennett
April 26, 2019

MJ once you come to understand the meaning of the word imputation you can think through the issue a bit more. Once you get a bit older you will figure out that elections are about the lesser of numerous evils. I'm sure many here could remind you of Labor's recent history at Federal and state level but that would be dragging the blog a long way off topic.

Under Labor's proposals the 'top end of town' will get full value for their franking credits. This change would have a bigger impact on small to medium retail investors as well as SMSFs, especially those paying out a pension. Meanwhile industry funds will get a free pass. Industry funds pay fees to union reps overseeing investments. Half of those fees traditionally go to the sponsoring unions. A good chunk of those fees are funnelled into ALP coffers. Do you see this as corrupt or just a gross conflict of interest?

April 26, 2019

MJ my widowed mother who was just a self-funded retiree would have lost 28% of her income if the franking proposal goes through, a drop from $30,000 with franking to $22,000. $22,000 is less than the full aged pension and below the poverty line.

Currently taxable income for dividends is the value of dividends plus the value of franking. If someone receives $7,000 in dividends, they get $3,000 in franking so taxable income is $10,000. With no franking refund after tax income is $7,000, so effectively without franking, tax rate for this individual is 30% under the ALP proposal.

April 30, 2019

Surprised no comments on what loss of a tax credit on share divs (call it withholding instead as that is what it is) will do to the Market.
Shorten is playing right into hands of those he wishes to penalise as when the 'little people' & there are hundreds of thousands, start selling their shares if this comes to pass, the market will flood, prices go down and those to whom the loss of the withholding tax is not so important will hoover up undervalued shares for a song, wait for all this nonsense to ultimately recover as they can afford to wait years, then sell at large capital gain and happily pay CGT.
Shorten is also penalizing Mums & Dads & working age labour voters who aspire to save and acquire share investments/savings in their futures just like many before them have but if tax credit is not refunded when it HAS already been paid by the shareholder, they won't bother to achieve/aspire. People will be discouraged from investing in Australian companies & being loyal in their purchases from companies they have invested in & that can't be good for the economy or job creation.
Big minus for this ridiculous impost is mental health /mental exercise of many retirees who follow the market daily as a serious interest to look after even small financial affairs, stops ga-ga-dom. You only have to look at the number of buyers and sellers and the relatively small lots ($20000 and under) at any one time on any sharetrading site to know that the market is very actively followed by 'little people'. Hope Mr Shorten has a budget for more hospital/ nursing home places when we lose our marbles faster??

May 01, 2019

“Hope Mr Shorten has a budget for more hospital nursing home places when we lose our marbles faster”. Just when I thought we had hit peak hyperbol, then along comes this post from Lyn.

May 16, 2019

"Of course the well to do want their handouts from the public purse and the fact that most of the benefits of franking credits go to high income earners rarely gets a mention."

Franking credits are unaffected by Labor's changes.
High income earners will continue to be able to deduct 30% of their 47% tax liability on dividend incomes.

The only people affected are low-income and marginal rate tax payers who will no longer receive a rebate on overpaid taxes.

Labor's changes don't affect the "well-to-do". Do you really think that the very rich give a stuff about their super income?


Leave a Comment:



2022 election survey results: disillusion and disappointment

Reader Survey on the Federal election 2022

Super timing guide for contributions and reversionary pensions


Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Now you can earn 5% on bonds but stay with quality

Conservative investors who want the greater capital security of bonds can now lock in 5% but they should stay at the higher end of credit quality. Rises in rates and defaults mean it's not as easy as it looks.

30 ETFs in one ecosystem but is there a favourite?

In the last decade, ETFs have become a mainstay of many portfolios, with broad market access to most asset types, as well as a wide array of sectors and themes. Is there a favourite of a CEO who oversees 30 funds?

Australia’s bounty: is it just diversified luck?

Increases in commodity prices have fuelled global inflation while benefiting commodities exporters like Australia. Oftentimes, booms lead to busts and investors need to get the timing right on pricing cycles to be successful.

Meg on SMSFs – More on future-proofing your fund

Single-member SMSFs face challenges where the eventual beneficiaries (or support team in the event of incapacity) will be the member’s adult children. Even worse, what happens if one or more of the children live overseas?

Latest Updates

Investment strategies

Five features of a fair performance fee, including a holiday

Most investors pay little attention to the performance fee on their fund but it can have a material impact on returns, especially if the structure is unfair. Check for these features and a coming fee holiday.


Ned Bell on why there’s a generational step change underway

During market dislocation events, investors react irrationally and it should be a great environment for active management. The last few years have been an easy ride on tech stocks but it's now all about quality.  

SMSF strategies

Meg on SMSFs: Powers of attorney for your fund

Granting an enduring power of attorney is an important decision for the trustees of an SMSF. There are alternatives and protections to consider including who should perform this vital role and when.


The great divergence: the evolution of the 'magnetic' workplace

The pandemic profoundly impacted the way we use real estate but in a post-pandemic environment, tenant preferences and behaviours are now providing more certainty to the outlook of our major real estate sectors.


Bank reporting season scorecard May 2022

A key feature of the May results for the banking sector was profits trending back to pre-Covid-19 levels, thanks to lower than expected unemployment and the growth in house prices.

Why gender diversity matters for investors

Companies with a boys’ club approach to leadership are a red flag for investors. On the other hand, companies that walk the talk on women in leadership roles perform better, potentially making them better investments. 


Is it all falling apart for central banks?

Central banks are unable to ignore the inflation in front of them, but underlying macro-economic conditions indicate that inflation may be transitory and the consequences of monetary tightening dangerous.



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.