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Committee Chair call to Cuffelinks readers

Editor's note: We originally ran this item assuming it was a genuine enquiry from a House Standing Committee, but the process has become politicised, including requiring people to confirm they were against Labor's proposal when they registered. There is also some uncertainty about what happens to the email addresses of people who register. We leave it here for the record.

Of interest to your audience

Hi Graham,

I hope you’re well.

As you know, the House Standing Committee on Economics has launched a formal inquiry into refundable franking credits. The objective of the inquiry is to give a voice to the hundreds of thousands of Australians who will be directly impacted by any change to policy.

Submissions for the inquiry are ongoing. As Chair of the Committee I am very keen to make sure we have submissions from everyday Australians who are going to be impacted, and who may want to be part of a broader campaign to stop unfair changes.

To that end we have designed a simple website where people can make direct submissions to the inquiry including a standard template, as well as opportunity for people to enter their own information if they choose.

It would be immensely helpful if you are able to promote it to your audience so they know there is a clear and simple way to make a submission and have their voice heard.

Please don’t hesitate to contact me if you any questions.

Kind regards,


Tim Wilson MP

Federal Liberal Member for Goldstein

368 Centre Road

Bentleigh VIC 3204

+61 (0) 3 9557 4644

November 11, 2018

I welcome the opportunity to comment on this topic and may I add praise for the very impressive and extensive submission now available from Wilson Asset Management [submissions made after about 23rd October have not yet been accepted and will I understand appear on/after 27th November]
I spoke to Mr Warren Entsch MP for Leichardt on Tuesday and he rang Tim Wilson while I was there.
I have made submissions to the Committee of Inquiry
* as ‘organization’ on behalf of the Association of Independent Retirees Cairns Branch; and
* a separate personal submission from John Mayo elaborating further and specifically on the ALP refusal to allow deductions for expenses incurred in earning taxable income, the denial of charitable contributions, and the serious negative impact on the fund raising ability of charitable organisations.
May I emphasise the following:
1. I hope Liberal, National, One Nation and others would challenge the nonsensical sound bite of Labour ‘if you don’t pay tax you don’t get refund’. IT IS SIMPLE STEALING OF REFUND ENTITLEMENTS FROM ONE GROUP OF TAXPAYERS. We DO have to declare both dividend AND imputation credit and should receive a THE REFUND TO WHICH WE ARE ENTITLED, in the same manner as employees are allowed deductions and receive a TAX REFUND for any overpayment of PAYE which has been forwarded to the ATO on their behalf. The ALP proposal unfairly discriminates between groups of taxpayers and is a rejection of the basic principles of all tax regimes – that equally placed taxpayers be treated equally [This has been mentioned in may of the submissions already shown on the APH website]
2. What has received little mention is the INABILITY TO CLAIM DEDUCTIONS FOR EXPENSES implicit in the ALP proposal. The more the deductions the MORE OF THE REFUND IS STOLEN. The more the deductions the more of the refund is confiscated. This compounds the unfairness and inequity and represents further rejection of basic taxation principles.
3. The consequence of the deduction not being available to one group of taxpayers and the inability to make such donations due to Labor’s theft of refunds will have a very significant negative impact on the income of charities and their ability to provide essential community services. In a cynical gesture to prevent charities objecting to the loss of direct income on their own balance sheet investments, not for profit entities have been granted a ‘carve out’ which continues refunds of imputation credits for the company tax paid on their behalf. HOWEVER NO SUCH ALLOWANCE HAS BEEN MADE FOR THE FAR LARGER AMOUNT OF INCOME they receive from individual taxpayers whose refunds have been confiscated.
This has been highlighted in my own submission and I understand in a submission from Cancer Council Queensland [and possibly others]

John Mayo

November 20, 2018


I have been unable to find the Wilson Asset Managment submission either on their website or on the website for the Committee.

You have obviously read it, so I would be interested to know if it is available somewhere.

Many thanks


Warren Bird
November 20, 2018

I don't believe he or WAM have made a submission. Geoff has used the media - eg in this article on the AFR (which you may need a subscription to access):

The Inquiry has loaded more submissions - now up to 431. (Mine is #282)

November 10, 2018

Unfortunately, Fred Woollard is not the only investment industry professional to demonstrate a lack of basic understanding of how the dividend imputation system works. This is frightening, and has demonstrated more to me than the royal commission about the lack of basic knowledge in some corners of the finance industry.

The good intentions of Geoff Wilson and others have also been somewhat undermined by the focus on retirees and older folk who obviously are wealthier on average than the general public by virtue of being older.

The biggest injustice is the proposed bastardisation of one of the rare, genuinely fair aspects of our personal taxation system. Instead of having franked dividends taxed at the marginal tax rate of the ultimate recipient, just like every other form of income is, Labor propose to levy a flat 30 percent tax on the lowest income franked dividend recipients. While the biggest dollar impact might be on retirees, it is also poorer low income earners who will be hit with a flat tax rate about equal to the average (not marginal) tax rate paid by a top marginal rate income taxpayer earning $180000 a year.

So as a low income earner entitled to the same tax free threshold as everybody else, at current interest rates I can:

- earn 3 percent or $18000 on $600000 in an internet savings account and pay no tax;

- receive $18000 in net rent from an investment property owned outright and pay no tax;

- receive $18000 in discretionary trust distributions from a wealthy benefactor and pay no tax.

I could go on.

On the other hand, if I received no other income whatsoever apart from a single dollar in the form of a fully franked dividend, I will forgo a refund of the 30 percent flat tax deducted on my behalf by the company and forwarded to the Government, who decline to let me have it assessed as a part of my overall tax position.

Had I overpaid PAYG tax as a small business owner, or paid TFN witholding tax on bank interest through the financial year, I would receive the appropriate refund after assessment against my overall tax position. Yet because my $1 of income was received in the form of a fully franked dividend, I forgo 30 percent flat.

Keep in mind too that this is the same 30 percent which those on higher income tax rates receive as a full 30 percent reduction in their income tax liability. Therefore, (excluding low tax rate retirees), everybody earning somewhere between the tax free threshold and approximately $180000 pays a lower AVERAGE tax on that portion of their income that flows from fully franked dividends than I do on my one dollar.

As a personal example, I know a young acquaintance whose total annual casual income falls below the tax free threshold. She had saved a few thousand dollars and asked for some basic guidance on a sound investment for the long term. Longstanding listed investment companies such as AFIC and ARGO came to mind. Or perhaps one of the others which invest in overseas shares and actually have nothing to do with Australian sharemarket listed companies and their franked dividends, beyond paying franked dividends out to shareholders by virtue of holding the investments in a company structure, as opposed to say an investment trust. Will she now stand to lose 30 percent flat to the Government because she doesn't earn enough to offset it? I suppose she will because evidently if she owns shares, any shares, even a LIC, which is just a company structure that could be holding any sort of investments, she must be wealthy. Meanwhile myself in a higher tax bracket gets to offset the full 30 percent liability against my marginal income tax rate. Good for me - tough luck for her.

Of course, as Warren Bird has pointed out, certain politically sensitive and arbitrary exclusions have been allowed which make a lie of the idea that there is a higher principle at work here. In truth, it is nothing but the politics of obfuscation and division which will leave escape routes for many of the intended targets, while hitting the financially unaware and poorest dividend recipients hardest.

If Mr Bowen and Mr Shorten genuinely do not understand the implications of this proposal and have honest good intentions, then they have a lot more work to do on it, and have no right to be standing firm and ignoring criticism of a policy which cannot possibly be justified on the grounds of logic or fairness. IF, and I'm not saying there is, there's an argument to be had, it should be based around possible adjustment to the personal income tax rates paid by various categories of taxpayers of all ages.

Disclaimer: I have no interest in a SMSF, and the proposed changes would have minimal impact on my financial situation. I do however detest policy based on dishonesty which further complicates a ludicrously complex tax system, leaves gaping loopholes for those of considerable means, and uses simplistic and divisive language to take advantage of the typically less well informed.

Christopher Sharp
November 19, 2018

I think you nailed this.

What Labor is proposing is inequitable because different circumstances and investment profiles result in widely different outcomes.

Industry fund: All ok
Commercial Super Fund: All ok?
SMSF in pension phase: Not all ok
High tax paying self funded retiree: All ok
Low tax paying self funded retiree: Not all ok- lose 30%

For a party that is built on mateship, a fair go and socialism this policy selectively targets individuals based not on their income level or net worth, but on where and how they invest.

I thought Chris Bowen had more sense.

Christopher Sharp

Nick Senior
November 09, 2018

Well, good to see everyone is thinking of themselves.
Australian taxation system (at all levels) has become increasingly complex over time.
Irrespective of the merits of this particular argument, both sides fiddle when a more global view is required.
Wether it is super or any other areas of taxation, please someone remove all the fiddles, rebates, offsets, refunds etc. and just have simple “taxed in, taxed out” rules at simple and probably lower levels.

Ron Cross
November 20, 2018

thank you Christopher Sharp for your precise example of the discriminating inequities in labor's proposal and they are the socialists !

Jon Kalkman
November 09, 2018

Imputation means that ALL of the shareholders’ share of the company’s profits is transferred to the shareholder as additional taxable income, where it is then subject to the shareholder’s marginal tax rate. The taxable income includes the dividend received AND the company tax portion withheld by the ATO. Because the company tax portion of that profit is already held by the ATO, that portion is then a tax credit when the shareholder completes their own tax return.

Labor’s proposal focuses only on the tax credit, which may or may not be refunded, while wilfully ignoring the fact that shareholders also have a higher taxable income (and tax liability) due to those dividends and pre-paid taxes withheld. To complete the fiction, Labor likes to pretend that franking credits are a gift from the ATO through a loophole unavailable to less sophisticated investors.

If taxpayers have franking credits in excess of their tax liability and those excess credits are not refunded, they will be paying tax on income never received. Consider a stay-at home spouse with the family's share portfolio in their name. S/he has a taxable income of $30,000 made up of $21,000 in dividends and $9,000 in franking credits. The tax on that taxable income is $2,242 (ignoring offsets). With the tax credit of $9,000, s/he is entitled to a refund of $6,758. Under Labor’s proposal, that excess tax credit will be withheld. Without the refund of the excess tax credit, s/he has a taxable income of $30,000 and an after-tax income of $21,000. S/he has paid $9,000 tax on that income compared to a PAYG taxpayer who pays $2,242 on the same taxable income. Their effective tax rate is 30% compared to 7.5%

Mr Shorten has said that if people do not pay tax, they should not get a refund, but there are many cases where taxpayers do pay tax and will still not get a refund and so their effective tax is higher than someone on the same taxable income. All Australian shareholders will discover that under Labor, the effective minimum tax rate on dividends (and only dividends) will be 30% regardless of their marginal tax rate!

November 09, 2018

Well said Jon.
As a tax practitioner for over 30 years, I cannot but applaud the comments you raised in relation to the machinations of the imputation system. The impact of the proposed changes affect ALL Australian residents who receive income in the form of franked dividends not just SMSF members. Since this proposal was canvassed, the public discourse has been concentrated around the SMSF sector and as a result, people have come to believe that only the SMSF sector is affected by this proposal. That demonstrates a fundamental misunderstanding of the imputation system. Thank you again for refocussing readers on the system rather than the impacts felt by a particular class of investor

November 09, 2018

If for example a person's taxable income was $45000 and they received $5500 in imputations credits as a refund they would receive zero income under Labor's new rules. But because of the medicare levy they would now be payable $900 . In other words the imputation credits do not offset all of the tax liabilities.

November 08, 2018

Not complicated:

Did retirees "plan on" franking credit refunds when making their future plans? Yes

Is it fair to change the rules on those least able to recover? No

Is it fair for retirees in an Industry Fund to be better off under Shortens proposal, than an identical portfolio in a SMSF? No

Will the "golden windfall" expected by the ALP evaporate as retirees adjust portfolios? Yes

November 09, 2018

The tax benefits of franking credits have encouraged many SMSF trustees to invest in highly concentrated portfolios of Australian shares. This may be great when things go well in that narrow segment of the investable universe, but it is quite risky.

Union super funds are far more diversified and as a result have other sources of income against which franking credits can be offset. "Identical portfolios" is a moot point because their portfolios are quite different.

While I don't accept that Labor's proposal is logically consistent, if it encourages SMSF trustees to adjust their asset allocation away from an intense concentration on Australian shares it's ultimately a good outcome.

November 08, 2018

Regardless of the fact that the overwhelming majority of your readership would be high net worth individuals, would any of them have actually read and taken note of Labor’s policy on dividend imputation? The Wilson led enquiry is no doubt a smoke screen for a forthcoming Liberal “pensioner scare campaign”.
I guess they have to do something to frighten back any oldies sick of their policy and political disfunction.
Regards, Paul

Warren Bird
November 08, 2018

I've read Bowen's arguments and they make no sense to me.

For one thing, the high sounding argument that if you haven't paid any tax why should you get a refund is undone by the fact that the ALP has exempted a large number of zero tax entities from this policy change! They've actually recognised that the refunding of tax paid at the company level to those on zero tax rates IS a sensible idea by the fact that they've exempted charities, universities and recipients of the pension from it!

If the argument in favour of abolishing the refunds actually had any merit in terms of the long-held principles of tax policy then it should be abolished for all who receive it. The argument is either one of high principle or it's a convenient tax grab at a targeted part of the population.

Which brings us all the way back to the point I've hammered all along, which is that if they think that self-funded retirees should not be zero taxed then change their tax rate. Stop hiding behind a seemingly high principled change to a tax policy that does nothing but make a straightforward system more complex than it needs to be. Be honest about who the residual beneficiaries of the current arrangement are after you exempt charities and not-for-profits, and tax them.

Why can't the ALP and others understand this? Why is someone who earns enough to be marginally taxed allowed to get repaid the company tax that's been paid on their behalf, but someone earning $1 less than the first tax threshold is not allowed to do so?

This policy change simply makes no sense!

November 08, 2018

I've read it. The repeated use of the term "cash refunds" is a deliberate attempt to position this as something brown-paper-baggish and dishonourable that the future Labor government, being noble and fair-minded, will put to the sword for the benefit of all society.

Rubbish. No cash refund involved - it's just a tax return under existing rules.

As has been said on these pages many times, if we need to change the tax rules for retirees based on the situation now not resembling the situation when those rules were put in place, then let's have the discussion - this is just a tax grab because Labor thinks it can get away with it because it assumes its core constituency automatically conflates "SMSF" with "wealthy bastard who should be taxed more because #hospitalsandschools.

This is not the way to raise more revenue from retirees.

November 08, 2018

I was surprised at Fred Woollard's comment above, that "The impact of Labor's tax change has been thought through. It should be supported."

Clearly, the proposed change had not been "thought through" (at least by labor) as evidenced by their almost immediate backflip to allow refunds of franking credits to those receiving a pension (and most likely to be labor supporters). I would not be surprised if labor drops its whole franking credit proposal as more people become aware of the inequity that would result in moving the goal-posts after the game has started.

John Parry
November 08, 2018

"Fred Woollard" claims to be a fund manager, yet his comment would suggest otherwise with such a poor understanding of the way franking works.

He says, "I support the abolition of cash refunds of fully franked dividends. " Fred, the dividend is not refunded, the tax element is. If it isn't then double taxation occurs. Then, "There are much better uses of government money than giving money to investors".

First, it is not "government money", it is owned by the owner of the company giving the dividend, i.e, the shareholder.

Second, the money is not 'given' in the sense you use, but it is merely a payment of profits.

No 'fund manager' would use such loose and misleading language. I would say Fred's submission is nothing but a Labor supporter's rant and as such should be ignored.

Fred Woollard
November 08, 2018

I also feel strongly about this. The submission I would like to make is below. The biased website refused to lodge my submission unless I agreed to support their petition.

Attention: Tim Wilson MP (Chair) & Committee members,

As a fund manager and investor, I support the abolition of cash refunds of fully franked dividends.

There are much better uses of government money than giving money to investors. Schools and hospitals are obvious examples.

It is not hard to rebalance one's portfolio away from shares if this causes a problem. A competent stockbroker should be able to advise on this.

The impact of Labor's tax change has been thought through. It should be supported.

Leisa Bell
November 08, 2018

Hi Fred, Submissions either for or against the abolition of franking refunds can also be lodged online via the APH website: or an email can be sent to:

Vince Vozzo
November 08, 2018

Fred Wollard is correct that Labor has thought through this policy.
It thought that it could sneak it through and steal money from those entitled to the refund - which is only giving back to investors excess tax that Has been paid on their behalf.
It is a cliched argument to say that it is better spent on schools and hospitals. Maybe Mr Wollard would like to donate a portion of his income to a better use such as schools and hospitals.

November 13, 2018

Hypothetically if the will of the people mandate the Labor party to form government, Can it be claimed that the passage of legislation to pass the proposed changes to the franking credit refunds would be considered “stealing money”?

Graeme Bennett
November 08, 2018

That's kind of funny Fred. You appear to run an absolute return fund. Hardly a low risk investment and presumably earning little by way of franked dividends. I am glad to see you making use of a marketing opportunity but to suggest the fully franked returns available from the major banks simply by consulting a stockbroker is, um, stretching it, at least if you want to retain the same risk profile. You overlook addressing the anomalies thrown up by Labor's piecemeal approach and wave off any objections on the basis of, well, nothing.

When you reply please pick up the incentives for superannuitants to spend down medium sized SFs to qualify for the pension and thereby make up the lost income. Perhaps throw in the blatant favouritism to industry funds and mention potential conflicts of interest. And conflicts of interest more generally. What savings will there be to the budget when superannuation savings are transferred to industry funds? Why do you believe it is fair for credit for pre-taxed income to be removed from investors.

And to finish it off when was the last time Labor fully thought through a policy? The RSPT perhaps?

Rob & Krys
November 08, 2018

Excellent Lisa/Tim:

We are currently in Europe but will be home by Christmas and have followed this issue with interest.

Thank you for making it easy to register our submission - internet is not easy to acquire sometimes in certain parts of Europe.

We feel very strongly regarding this issue

Regards Rob and Krys


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