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Franking credits lament: was it worth it?

Even in defeat, many Labor rank-and-file members and their leaders are arguing the merit of some of their tax policies taken to the election.

Especially the franking credits policy. There are those who lament the 'loss' of revenue as a result of franking credits refundability now remaining intact under a Coalition government. For example, Anthony Albanese said on the ABC’s 7.30 Report just two days after the election, "the fact is that $6 billion [per year] is a lot of money”, not completely ruling out Labor's franking credits policy in future.

Was the policy worth it?

Refundable franking credits have not risen 10-fold

Labor consistently claimed during the election campaign that refunding franking credits is unsustainable because the amount has increased more than 10-fold from $550 million in 2000/01 to $6 billion a year, and rising. But is there any substance to that claim? What’s the basis for these numbers?

The $6 billion a year claim was the result of Treasury analysis that revealed $5.9 billion worth of franking credits was refunded in the 2014/15 financial year.

According to Treasury documents, in 2014/15, $47.5 billion worth of franking credits were distributed in Australia. Of that amount, $23.5 billion were eligible for franking credit refunds, either in the form of cash or as offsets to tax liabilities. The other $24.2 billion was distributed to foreign owners and Australian companies, which are not eligible for refunds.

Of the $23.5 billion in franking credits eligible for refunds, $5.9 billion was returned in cash and $17.6 billion was used to offset tax liabilities. Of the $5.9 billion returned in cash:

  • $2.3 billion was returned to individual investors outside superannuation funds
  • $2.6 billion to SMSFs
  • $0.3 billion to other super (including industry super funds)
  • $0.7 billion to tax-exempt entities.

So for a start, that's only $2.6 billion to the main targets, SMSFs.

The $23.5 billion is just over three times more than the $7.6 billion of refundable franking credits distributed in 2000/01. A larger economy and a considerable increase in investment activity in Australia since 2000/01 would have contributed largely to that growth in Australian equities and distributed franking credits, but that would not be the sole contributor.

Prior to 2007/08, both the percentage of refundable franking credits received by super funds and the percentage actually refunded as cash grew modestly from a negligible base in 2000/01. Then when the tax exemption of superannuation earnings in pension phase was introduced in 2007/08, growth in SMSFs and super fund investments increased sharply. And this saw the average franking credits refunded as a percentage of credits received by SMSFs increase from 35% pre 2007/08 to 60% post 2007/08. Almost double. Therefore approximately half of the $2.6 billion cash refunded to SMSFs in 2014/15 could be attributable to the enhanced tax-preferred treatment of super, being $1.3 billion.

Also, there were significant changes to individual tax rates and thresholds post 2006/07 that would have contributed to an increase in refundability. The lower the tax rates, the less tax to offset franking credits against, and hence the higher the amount refunded. And average cash refunds to individual investors as a percentage of total eligible franking credit refunds grew from 10% prior to 2006/07 to 15% post. A 50% increase. So of the $2.3 billion cash refunded to individuals in 2014/15, approximately $0.8 billion would be due to lower tax scales.

Therefore, strip out $1.3 billion for abnormal super growth plus $0.8 billion for lower tax scales, and cash refunds grew from $0.55 billion to $3.8 billion in adjusted terms. Then finally, adjusting the $3.8 billion for inflation (average inflation rate of 2.7% over 14 years) brings the increase to just $2.6 billion in 2000/01 dollars.

Other reasons to doubt the numbers

The $1.6 million transfer balance cap for SMSFs was introduced in 2017/18, well after the numbers on which Labor's calculations are based. The cap has directed funds out of pension phase super accounts into accumulation accounts or other investments. The effect is a reduction in franking credits refunded as cash since 2017/18, all else being equal, as refunds can be used by large SMSFs.

And all this before the many other ways available to retain franking credit refunds or mitigate the impact.

Cash refunds are not actually a leakage of revenue. They are the rightful return of excess taxes withheld from investors, offset by those high marginal tax rate investors who need to top up their franking credits with additional tax payments.

Therefore, when Labor claimed that cash refunds on franked dividends are costing the budget $6 billion a year, an increase from just $550 million a year in 2001, and that its removal would improve the budget bottom line by $58 billion over the decade, the claim appears highly exaggerated.


Tony Dillon is a freelance writer and former actuary, with no affiliation with any political party.


June 05, 2019

Daniel (23/5/19), Couple of corrections.
There was Pensioner Rebate & Low Income Aged Person Rebate in early 1990's. Before that, don't know. I was 90's ATO- trained volunteer on Tax Help program for low income persons in community where I live which I did to gain face-face experience with clients & to 'pay-back' to the community whilst retraining in accountancy. It was not introduced in 2000 as you stated but modified. You can verify by googling that.

We don't have individual tax rate of 15% which you stated, the lowest is 19%, plus Medicare if applicable.

Most current retirees had tax -free threshold for income between $4700 odd to 6000 for most of work lives, not the $18,200 that Labour introduced from Yr 2012/13 so they have paid tax, say from $6001 to make it easy, not $18201 for most of their lives. At 19% that's $2318 p.a.more tax than paid by a working Australian today. From memory previous rate was 15% but still $1830p.a. more than today's generation which gets $18,200 tax -free so don't slay retirees as they paid more tax in that band whole of working life.

Imagine how a fit 75 yr old, on a modest income who takes no medication due to good diet & health education ( home-cooked as that is all he knows) rather than today's young who 'order-in' 2-3 times/wk because they can afford to but don't know calorific value of those meals for safe health, would feel when you talk about the young providing school & hospital services when many schools & hospitals today have added facilities because in retirees' younger days they volunteered for school canteen or via Lions/Rotary to fund-raise for hospital essential equipment/facilities & I can name 1 volunteer-built cancer facility for all ages in my community. Apparently the young don't have time to do that as too busy---higher-flying lives, the internet and electronic games take up their time.

Imagine how he feels when the young think it's equitable for him to pay 30% tax on a part of his income when it should only be 19% or zero.
On the upside, he feels patriotic as he invested when had opportunity in CBA & Telstra in the 90's , showed the way to keep investing in Australian companies and still feels good as he continues to support Ozzie companies with Franking credits instead of younger generation's obsession with Amazon and Apple. Sadly one can't put an old head on young shoulders.
Eg is generic 'He', it is not me but I did make sure did canteen duty via flexy hours & made up for what I couldn't due to work by making over a year 500 chutneys for fete towards extra books,etc. This age of entitlement that thinks Govt should provide it all & older people did nothing irks me beyond words. They all need a history lesson in life. Govts CAN'T do it all to top standards.

D Ramsay
June 03, 2019

Thank you Tony Dillon for doing that comprehensive research.
As an individual I am not in a position to do it myself, but I always doubted the numbers that Bowen used re ongoing costs to the budget of Fr Cr's.
Why ? - because the pollies (both sides) don't actually lie (despite all the jokes about their mouth moving = telling a lie) but they have a happy knack (for their party's sake) of making glib statements (i.e. Simply worded headline grabbers that any simpleton can understand) that ignore the complete picture. When they do this and then they are shown to be giving incomplete information, one may ask why do they do it ?
I see 2 reasons - one is pure laziness (by not giving due diligence to producing proof of what hey say) and the other is because it suits their agenda.
When working in industry I was often faced with trying to sway a decision re the acquisition of capital goods from various vendors and if I couldn't compile valid, verifiable numbers that backed up my argument I lost the argument.

Oh how I wish we could hold our pollies accountable for their decisions on an ongoing basis (like monthly KPI reviews as we have in industry)

Tony Dillon
May 24, 2019

Just as a footnote to the article. The $17.6b in refundable credits used to offset other tax is split about $12.5b individuals, $5.1b super. And the average marginal tax rate of those individuals offsetting tax is about 40%. So top-up tax paid by individuals is about $4.2b, a fair proportion of the $5.9b paid in refunds.

May 23, 2019

Sure franking credit is generous so do childcare rebate or politician superannuation,etc. all tax payer funded !If the rules apply to the whole system I.e Industry fund or other Retail fund and not only to SMSF then it is a fairer system. You cannot discriminate on gender, race etc and so the superannuation structure.
Beside if a person has shares investment outside super it will be tax on marginal tax individual rate. If all the income from shares- it will be tax around 18% if franking credit abolishes it will be around 26%.- almost equivalent to company tax! But if the person is a pensioner there is no change but bad luck for pensioner after the tax rule changed will lost the benefits! It is unfair and suck ! Politician needs to sit and think carefully the whole implications to the whole systems. They need a fairer system- all in -not targeting certain individual. This is more like a class warfare- divided you fall United is victory!

May 23, 2019

"Sure franking credit is generous so do childcare rebate or politician superannuation,etc. all tax payer funded !"

In the case of childcare rebate, the tax payer is all tax payers - welfare.

In the case of franking credit, the tax payer is the shareholder's company - not welfare.

In the case of wage income tax credit, the tax payer is the employee's employer - not welfare.

May 25, 2019

Well said Dudley. And that my friends is the difference between a tax offset and a tax credit. The ALP policy makers clearly do not understand the difference. If they did, they would understand that franking credits should not be treated any differently to PAYG instalments or withholding.

May 23, 2019

Hello Graham,

As an ordinary citizen, I helped to campaign fiercely against this unjust policy, even getting a thankyou letter from Tim Wilson, who,by the way, played a big part in presentations of the House Economics Committee around the country ( which he chairs), including the one at Torquay at which out of about 35 speakers, ( of whom I was one ), 33 spoke against Labors policy, and were roundly applauded by the audience.
The " knock on " effect to the audience must have been immense, and, as this was done around Australia, a lot of people would have been impressed on the downside against Labor's position.

Remember, many, many people would be like me, with modest portfolios, and looking forward to their modest refunds, which are theirs anyway.


Graham Hand
May 23, 2019


Surely you understood the context of the 'how good are franking credits' reference. Nothing to do with my politics.

In fact, while my politics are my business, just to put your mind at rest, there is no measure by which I am a 'coalition supporter'. Never donated, stood on a booth, attended a meeting, handed out a leaflet, doorknocked or joined a party.

And I'm not sure how we bought into climate change. We have published many articles on ESG investing. G

Peter Smits
May 26, 2019

You may not by your own definition be a coaliton supporter but you probably voted for them.

Graham Hand
May 26, 2019

Hi Peter, well, you obviously know little about me and while my politics is my business, I'll give you a hint. I live in Warringah. I try to keep politics out of this publication but the debate might land one way or the other depending on who writes or who comments.

May 23, 2019

Hi Graham.

I detect the sound of a coalition supporter speaking in your editorial.

Don't be too smug in your warm and fuzzy feeling. I heard today that franking credits will go under Morrison's watch as they will simply be UNSUSTAINABLE. You might want them. We all like them. But removing corporate income will not work unless taxes go up or the country makes a windfall somewhere. Then factor in that the government says it is going to reduce taxes....especially for the wealthy. Also you cannot get much more from middle income earners because they have no propensity to pay.

You might want a free lunch but it appears that this is going to disappear just like all the other handouts this government is giving. Think Tony Abbott where a promise is words which are intended never to be kept.

You may want to confront reality and where the country is heading rather than wallow in something which you may want but which will slip away like water through your fingers.

Cheers, MJ

PS Did you hear that BHP is cutting back on coal and also the comment today from a university in Queensland stating that coal was in significant decline?

May 23, 2019

"franking credits will go":

Franking Credits are merely a means of assigning Tax Credits for Tax Paid by a Payer on Income owned by a Payee to said Payee.

Works perfectly for both wage income tax and for gross dividend tax.

If Tax Assessments are thought too small in relation to Tax Credits - change tax rates.

Tony Dillon
May 23, 2019

"removing corporate income will not work unless taxes go up"

MJ, if by "removing corporate income" you mean the net corporate tax take is zero when dividend recipients receive cash refunds for unused franking credits, you are not considering the bigger picture.

That is, the net tax take is only zero in respect of those on a zero marginal tax rate. Offset of course by those on higher marginal rates who pay top-up tax on the company tax already paid. Also, not all dividends are fully franked, and profit not distributed as dividends is taxed at the corporate rate. And a large percentage of ASX stock is foreign owned, with that ownership not receiving franking credits. All this amounts to somewhere near a net 30% tax take on total ASX profits, which happens to be the corporate tax rate.

It all gets back to the essence of the imputation system, and that is, the portion of corporate profit that is distributed as dividends, becomes individual income for tax purposes.

May 23, 2019

Targeting franking credits was perhaps not the most efficient way to tackle the imbalances that have built up in the tax system, which disproportionately benefits retirees. But this problem won't go away as younger cohorts start to wise up.

Seniors are now the only age group to pay less personal income today than they 20 yrs ago (except for under 25's who most likely are at Uni). The share of seniors who pay income tax has dropped from 27% in 1999 to just 15% now. I'm not aware of many places you have a multi-million dollar home, $3.2m in pension, a further $1.1m outside Super and pay no income tax, with a marginal tax rate of 15%. On top of this there are refunds of negative tax in a tax-free environment. This was introduced by Howard as a sop to the grey vote when the budget was awash in mining boom revenue. It starts to look rather egregious to the detriment of the rest of the working population whose shoulders seniors are standing on.

I'm sure to be reminded of the 'generational bargain' to support older Australians because that's what they contributed to the tax system through their working lives. It should be noted that individuals previously saw less of their tax dollars go towards supporting older Australians due to lower spending on health. Cue younger Australian to foot the bill for govt expenditure which is expected to double over 40 yrs. But hey the current crop will be gone so not their problem eh? Every dollar foregone due to franking refunds or no tax at all from well off seniors has to be raised elsewhere to cover services that seniors will be increasingly relying upon. The irony!!

Some of the assertions made in this piece are interesting. $2.6bn a year to SMSF sector is still substantial and pays for plenty of upgrades to schools, hospitals, infrastructure etc. Of course the cost of franking credits refunds increased exponentially following the exemption of Super earnings in pension phase in 07/08. Retirees were incentivised (somewhat perversely) to overweight their portfolio to Oz shares and collect more refunds, to detriment of government revenue and optimal diversification. There is no reason to expect this behaviour to change going forward so the $2.6n looks baked in and is more likely to increase. Also not sure what the point is around tax free thresholds. Good friend of the grey vote John Howard introduced SAPTO in 2000 which raised the tax-free thresholds of those who reached pension age (up to $58k tax-free for couples). Lower tax to offset credits against means more franking credits refunds. Unsure of the point here other than to reinforce the unfairness of the existing system. Australians over 65 with an income of $50,000 or $75,000 pa pay less than half the tax of someone of working age on the same income. Nice if you can get it!! If retirees are forced to move assets into accumulation phase (my heart bleeds) to be taxed at 15% they will still receive refunds, just not as much. Also not sure why you are adjusting franking credit refunds for inflation given taxation is applied to nominal revenues..

A cleaner approach may have been a flat tax on pension earnings or income payments. But would the howls of injustice from those affected have been any less loud? I doubt it.

Mark McLaughlan
May 23, 2019

Well laid out explanation. A scheme to avoid double taxation on corporate taxes made sense, handing back cash so there was no tax on those corporate taxes to a small group of people (which includes me) is about as inequitable as you can design a system.

Mind you Labor’s proposal was such a mish mash that it was almost as bad.

Christopher O'Neill
May 23, 2019

"no tax on those corporate taxes to a small group of people is about as inequitable as you can design a system"

Doesn't that depend on the income of the person receiving the income?

How can anyone say that it is inequitable for someone whose income is below the tax-free threshold to pay no income tax?

Tax-free super gave tax-free status to huge incomes but the vast majority of Australians seem incapable of understanding the difference between the normal tax-free threshold and tax-free superannuation.

May 25, 2019

Mark, you obviously don't understand the scheme if that is what you believe. Franking credit refunds mean that tax is paid at the owners marginal tax rate. This is the absolute most fair system. If I have a marginal tax rate of less than 18000, then I pay no tax. Let's pretend Labor's policy is in place and say you earn 200k and recieve 20000 in franked dividends - that is worth 20000 dollars to to you. If I earn nothing, then that 20000 is worth only 14000 (0.7x20000). Do you think that you, as the high income earner, should get better value out of those shares than me?

The problem with franking credit refunds is not the refunds themselves, they are inherently fair. The problem is how they interact with tax free income. That is the problem that needs to be addressed.

Look at the original white paper that propesed franking credits - they stated that step 1 was the introduction of franking credits, and step 2 was the introduction of franking credit refunds. They explicitly state that it is not a fair system without the refunds.

May 25, 2019


"the vast majority of Australians seem incapable of understanding the difference between the normal tax-free threshold and tax-free superannuation."

I think your comment is pertinent to some high profile pollies. Why would a political party of any persuasion seek to redress this blatant imbalance your refer to above by targeting the dividend imputation system. The latter is not the evil monster that some think it is but merely the catalyst for revealing the flaws in the current taxation treatment of super in pension mode.

May 23, 2019

"refunds of negative tax":

Only refunds of 'positive' tax possible - otherwise it is not a 'refund', it would be 'welfare'. And selfie retirees don't receive welfare - else they are not selfie.

Such as the non-contributary Age Pension - Assistance to the aged: $70.2G.

Budget 2019: Where every dollar comes from, and how it's spent:

"$2.6bn a year to SMSF sector is still substantial ":

Assistance to families with children is more substantial: $37.4G.

Goods and services tax: $67.4G - handed to States to fund "schools, hospitals, infrastructure etc".

I imagine oldies, especially selfies, try to avoid paying GST but my guess is that they pay a lot more GST than $2.6G.

May 23, 2019

That's way too clever for this page, Daniel, extremely well articulated.

Tony Dillon
May 24, 2019

"Also not sure why you are adjusting franking credit refunds for inflation given taxation is applied to nominal revenues".

I agree Daniel, taxation is applied to nominal dollars. The refunds were adjusted for inflation for the sole purpose of showing that they hadn't increased ten fold in real terms.

Jon Kalkman
May 23, 2019

Thank you for this excellent analysis. We tried to tell them that, by using 2014-15 figures, their calculations were grossly exaggerated. But they could not admit to that if they were going to keep up the fiction that this was a "rort" the country could not afford.

Later this year, we will see in the ATO's summary of SMSFs tax returns, the extra tax collected from limiting the zero-tax pension phase to $1.6m because all super in excess of the amount is now subject to tax. That will finally nail the duplicity of these dodgy figures.

Just one quibble. The tax exemption for superannuation earnings in pension phase was introduced by Keating in 1992, when super became universal and compulsory and has remained unchanged since that time. The changes introduced in 2007 eliminated the tax paid by members on any withdrawals from super after the age of 60. As I have explained previously, that was relatively easy to do because that tax collected very little revenue anyway.

As you say; the lower the tax rate, the bigger the refund. So the source of the "problem" of large refunds can be blamed on Keating, not Costello. If Keating had adopted the system used in other countries, which make contributions and earnings in accumulation phase are tax-free, and then benefits are taxed normally, the result would be much larger retirement balances and no more arguments about retirees paying insufficient tax. But Keating was not prepared to wait 30 years to collect his tax, so we have ended up with a dog's breakfast.

Christopher O'Neill
May 23, 2019

"that was relatively easy to do because that tax collected very little revenue anyway"

I don't know, the $2.6 billion of revenue lost just in 2010 had to be lost on something. The biggest loss might be from the abolition of RBLs which would now allow massive tax-free pensions that no-one would have attempted before 2007.

One way or another those 2007 changes cost a huge amount of tax revenue that ONLY goes to very well off superannuants (>$55,000 net currently). A lot of the lost revenue appears as franking credit refunds so tax-free super feeds into the political attacks on those.

Jon Kalkman
May 23, 2019

You need to differentiate between the tax paid by the super fund (tax-free in pension mode since 1992) and the tax paid by the member of the fund on withdrawals from the fund (tax-free since 2007). The fund owns the shares and receives the franking credit - not the member. That is the $2.6B.

Before 2007, the member only paid tax on the proportion (not the amount) of the payment that came from their concessional contributions and that had a 15% tax rebate to compensate for the 15% tax on earnings. Large funds had proportionally lower concessional contributions.

The tax on member withdrawals still applies to people who access super before age 60 and any death benefit paid to eligible beneficiaries but not dependents eg. adult children.

Christopher O'Neill
May 24, 2019

"You need to differentiate"

No differentiation is needed to know that Simpler Super cost $2.6 billion in 2010, is rising briskly and ONLY benefits the well off.

It's neither here nor there that not much of that cost appears in one particular place. The bottom line is the same regardless of where the components appear and it's the bottom line that makes it such appallingly bad policy.

May 24, 2019

Reply to Jon Kalkman, who likes to correct others so here's where he needs correcting. He claims that :

The tax exemption for superannuation earnings in pension phase was introduced by Keating in 1992.

Not true. Superannuation earnings in pension phase have never been taxed. Earnings in accumulation phase have been taxed since 1988 (by Keating) and there has been no subsequent change. I was there at the time and know this. I don't know where JK gets his wrong info from.

FYI here's just one refutation of his claim :
Look at the third and fourth paras under the heading The Taxation of Superannuation, in particular :

"The income earned on assets supporting the income stream remained exempt in the fund, as they were taxed at personal rates once paid to the individual."

May 23, 2019

I am pleased that the proposed ALP policy change will now not occur.

The removal of this arrangement was grossly unfair and was using the complexity of the benefit to achieve an alternative outcome.

The approach the ALP, or any political party, should follow is to be transparent.

if funding is required for a specific purpose then you vary the tax rate - that way everyone makes a decision on the benefits or otherwise of the proposed expenditure.

There will come a day again when taxing of pension benefits or pension accounts will need to be introduced. We can not have a huge, and increasing, pool of investment savings earning returns and not paying some tax - that is one of the current issues - and at the moment it is probably possible to have a low tax rate and the fund can still get a refund of franking credits. [while also reducing the loss of company tax received]

There is also a need to look in much more detail at how money is being spent. There has to be so much waste in government expenditure, waste that can only be found by going into departments, fully reviewing / auditing it, and seeing for yourself. The waste comes from regularly granting billions / millions of dollars without a specific purpose just to appease political lobby groups.

Michael O'Rourke
May 23, 2019

Very useful analysis.

It was always apparent the numbers were flawed - but to balance big spending you need big revenue increases - at least on paper.

Besides the validity of the numbers another important issue concerns the Grattan Institute; their loss of reputational capital, and whether public funding is deserved compared with other similar organisations.

To justify this the Grattan Institute Board members including those from Melbourne University should be responsible for processes to assure reputation - not just for independence but also for intellectual quality. This does not mean reviewing and agreeing conclusions of research. But it does mean Board oversight to assure that research is conducted with academic rigour, properly supervised and subject to independent review before analysis is presented in the public domain.

This humble voter is sceptical that this is happening effectively , and expects many more may be so.

May 23, 2019

To balance big spending you need to borrow or find areas to make big offsetting cuts to spending.

I don't want other tax payers paying for my cancer treatment, aged care, family violence mitigation, arts and culture, ABC, solar panels, free parking places at railway stations, high speed train, airport rail links etc etc

David Wilson
May 23, 2019

The retirees of Australia have scored a crushing victory over the taxpaying younger generations. How does that make you feel. "Was it worth it?" is a great question to ask right now when considering the 'cost' of this outcome - to health services; education, the environment etc.

And the news gets even better for the Boomer generation when you realise that unrestricted negative gearing on property can continue unabated. Too bad for first homebuyers (as Jessica Irvine outlines in today's SMH).

The naked self interest of Australia's retirees - how good is that!

Christopher O'Neill
May 23, 2019

The retirees of Australia with income outside of super pay exactly the same tax as taxpaying younger generations on the same taxable income.

How is that a "crushing victory"?

May 23, 2019

No they don’t. Read my note. Australians over 65 with an income of $50,000 or $75,000 pa pay less than half the tax of someone of working age on the same income due to the effects of SAPTO/LITO. If you still don’t believe I will run some comparisons..

May 23, 2019

Christopher O'Neill: "The retirees of Australia with income outside of super pay exactly the same tax as taxpaying younger generations on the same taxable income."

Daniel: Australians over 65 with an income of $50,000 or $75,000 pa pay less than half the tax of someone of working age on the same income due to the effects of SAPTO/LITO.

Both wrong.

Income $21,594, net: non-senior $21,594, senior $21,594 diff $0.

Income $29,608, net: non-senior $28,085, senior $29,608 diff $1,523.

Income $37,000, net: non-senior $33,747, senior $34,346 diff $599.

Income $50,000, net: non-senior $41,983, senior $41,983 diff $0.

Income $58,108, net: non-senior $58,108, senior $58,108 diff $0.

Christopher O'Neill
October 26, 2019

"due to the effects of SAPTO/LITO"

The election was not about SAPTO/LITO.

The "crushing victory" occurred when unlimited tax-free pension funds and pensions were passed in 2007 by the Howard government WITH the acquiescence of Labor.

Labor had no plans to reverse that crushing victory. 

Tom Harbrow
May 23, 2019

The biggest drains on tax revenue are rightly health, education and subsidised childcare, I have not heard one politician of any colour question the efficient use of funds by these monsters, for instance childcare has been openly rorted and a disproportionate amount of money in health goes into politically favoured administrators instead of doctors, nurses and sensible infrastructure, I guess education has similar structural faults that cost dearly, my point is throwing an ever increasing amount of money at these services isn't working and need a serious audit and cleanout.

John Simkiss
May 23, 2019

At the extreme, hard to support one fund(apparently) with $400-$500million able to get both refund and a concessional rate of 15% above $1.2million on asset/earnings.

John 23/5/2019

Geoff Larsen
May 23, 2019

Thanks for this information Tony.

I never understood why it was just the cash refunds which are looked upon as tax leakage. Presumerably it's because only this amount, $5.9 Billion in 2014/15, appears on the expenditure side of the tax office accounts.

$net revenue = $total revenue - $total expenditure.

However the $17.6 billion of offsets, in 2014/15, was equivalent to a cash refund of $17.6 billion followed by tax payable on the franked dividends, including the franking credits, $dollar for $dollar an offset has exactly the same impact on $net revenue, the above equation, as a cash refund.

This "tax leakage is hidden in the $total revenue above, reducing $net revenue by $17.6 billion.

Another way to show this hidden expenditure is to bring it onto the expenditure side by adding the $17.6 billion to both $total revenue and $total expenditure. The - sign between the 2 means $net revenue remains the same. However we see now that the total expenditure is $23.5 and the $total revenue now includes the total tax collected on franked dividends in $2014/15 by Australian resident, franked dividend receivers.

Call the $23.5 "tax leakage" if one likes but actually it's the total cost of running the current dividend imputation tax system, eliminating the double taxation of franked dividends, for Australian resident shareholders.

May 23, 2019

This is much better analysis. Why didn't this come out during the election campaign.

Michael Levy
May 23, 2019

Just another demonstration of the duplicity of Shorten / Bowen.
You can bet politicians of all persuasions will try again.
The answer? MY THOUGHTS.
Have a house or more under your belt.
Have sufficient investments outside of super in personal accounts that will either absorb franking refunds OR are insufficient in scale to attract tax.
In retirement set balances to maximum tax free income – considerable for two partners.
Invest substantially in growth assets when income from investments is not critical.
Invest in a “core” of long term (i.e.low income) inflation adjusted bonds e.g. Sydney Airport, Australian gas Network etc.
Don’t live too long! Move to NZ!


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The crash in lithium and nickel prices has left companies scrambling to cut production, billionaires red-faced, and investors wondering how a ‘sure thing’ went so wrong. There are plenty of lessons for everyone.

Welcome to Firstlinks Edition 545 with weekend update

It’s troubling that practical skills like investing aren’t taught at schools as it leaves our children ill-equipped to build wealth, and more vulnerable to bad advice. Here are some suggestions to address the issue.

  • 1 February 2024

For the younger generation, we need to get real on tax

The distortions in our tax system have been ignored for too long, and we're now paying the price. It's time Australia got real and addressed the problems to prevent an even greater intergenerational tragedy.

Latest Updates


16 ASX stocks to buy and hold forever

In his recent shareholder letter, Warren Buffett mentions several stocks he expects Berkshire Hathaway will own indefinitely, including Occidental Petroleum. We look at ASX stocks that investors could buy and hold forever.

Investment strategies

Clime time: 10 charts on the outlook for major asset classes

The charts reveal that interest rates can't rise much further as Australian mortgage holders are under stress, bank dividends look solid, and the bond market is in flux because yields are being manipulated.


Phasing out cheques, and what will happen to cash?

Cheques and bank service, or the lack of, were major topics when I addressed a seniors’ group recently. The word had got out that the government was phasing out cheques, and many in the audience were feeling abandoned.


What financial risks do retirees face?

Treasury's consultation into the retirement phase of superannuation is generating a lot of interest. This submission to the consultation outlines the key financial risks to an individual’s standard of living in retirement.


Recession surprise may be in store for the US stock market

Markets are partying like it's 1999, but history suggests that US earnings and economic growth are vulnerable following an interest rate tightening cycle. Investors should prepare their portfolios accordingly.

Investment strategies

3 under the radar investment opportunities

The Magnificent Seven are hogging the headlines, yet there are plenty of growth opportunities elsewhere, at a fraction of the cost. Here are three stock ideas riding key areas of structural and cyclical change.


Why a quant approach can thrive in the age of passive investing

The rise of passive investing is unlikely to derail the value of quantitative strategies. Passive investing hasn’t eradicated the irrationality of crowds, leaving pockets of opportunity to outperform indices.



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