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Your opinions on Labor's franking proposal

A large number of readers shared their opinions and future intentions regarding Labor's proposed changes to franking credit refunds - almost 2,000 of you! Thanks for taking the time to participate in last week's survey.

For those who want to dive deeper into the debate, there are 25 pages of comments attached as a document at the end of this article. This subject really fires people up.

Overall, 12.5% support the proposed changes, 83.7% oppose and 3.8% remain undecided.

Respondents supporting the Labor policy proposal

The majority of people supporting cited paying a fair share of tax as an important factor (more than one choice was permitted).

We all need to pay our fair share of tax69.4%
SMSFs in pension mode should not be taxed at zero26.5%
We should tax companies who make a profit34.7%
I am a Labor supporter and trust the party to do the right thing2.9%
Other (please specify)33.9%

Some common reasons for supporting the Labor proposal included:

  • Refunding franking credits to retirees (i.e. not paying any tax), especially with large SMSFs, is unsustainable.
  • Do not believe in getting a tax refund on income I did not pay tax on.
  • Why should someone over 65 (retired) on $75,000/$150,000 yearly not pay any tax?
  • My assumption is that the zero rate of tax for pension phase superannuants will remain untouched (sacred cow), on which basis I think the priority is to make sure that every single dollar of corporate earnings is taxed.

Respondents opposing the Labor proposal 

On the other hand, the majority of opposers cited avoiding double taxation as the main factor (multiple responses allowed).

I agree with the principle of not taxing company profits twice75.8%
The franking credits system is a fair way to collect company tax33.9%
A better way to raise budget revenue would be a tax on pension super income16.3%
I don't think the Labor Party fully understands what they are proposing62.5%
The policy is divisive because it picks winners and losers69.1%
Other (please specify)23.5%

Some common reasons for opposing the policy included:

  • People have planned their super over a long period of time as this policy has been in place almost 20 years. We stand to lose 30% of our income because of this policy without any way to make it back up. We can’t go back to work. It is also very divisive.
  • At least needs to be grandfathered or capped. I set us up over 25 years.
  • I think the Labor party committed to this policy without having fully understood all the implications.
  • The major impact will be with self-funded retirees on lower incomes. They've tried to do the right thing, the goal posts are moving and we'll all pay as some will become eligible for at least part pensions.

We also found that dissatisfaction rises with age. The under-40 years group were 65% opposed, the 40-54 years group 71% opposed, and 86% of people 55-and-over were opposed.

When asked how well the franking system was understood, over 40% gave themselves a score of 10 out of 10, with 95% giving themselves a score of 7 or more. Clearly, a well-informed sample group.

Lastly, we asked if there would be changes made to investments and super if the proposed policy were implemented. Over 50% said yes, while 21% said no changes and 27% were undecided.

The most common change will be selling shares that pay franked dividends (74.5%) and buying assets with unfranked income, which augurs well for flows to global equities and property trusts if implemented. The second most popular action was to spend money in order to qualify for the pension (26.6%).

Sell my fully franked shares and buy assets with unfranked income such as global equities or property trusts74.5%
Switch my super to an industry fund or retail fund22.3%
Add my children as trustees of my SMSF17.0%
Spend my money to reduce assets so I qualify as a pensioner26.6%
Hold on to my house so my main asset remains exempt from assets test25.9%
Other (please specify)25.9%

There were many additional comments provided, and an edited compilation of these is included here. Cuffelinks includes this in the spirit of sharing views and an open debate and takes no responsibility for the comments.



March 23, 2019

I can see where people are coming from, however I can't see if there's any way to stop labour's proposed policy.

If labour does get elected, is there still a chance to block the proposal?

March 21, 2019

Its simple, the policy as it stands targets the low income earners who pay less than 30c in the dollar from whatever source available. How is this targeting the wealthy (ie 49c in the dollar) as Labor claims?

Ian B
March 14, 2019

I really think this debate should be much simpler:

If you think superannuation earnings should be taxed, then simply lower the tax free threshold or abolish it altogether.

The current Labor proposal results in vastly different outcomes for slightly varying circumstances, and as such definitely deserves contempt from any person with any sense of fairness.

Harvey Dickinson
March 12, 2019

If there is one thing that is obvious from your correspondents it is the confusion that is out there about the whole subject. Take the confusion caused when one correspondent is talking about non super investments and a super minded correspondent replies talking about his own super experience.
This occurs with your first two correspondents. With non super investments it is perfectly possible to loose 30% of your income (from share investments).
It is clear that Labor wants confusion out there because the non share voter will be easily persuaded and if the share investors are fighting amongst themselves well that's just wonderful.
Right from the get-go Labor has been taking the approach of ignoring investors and talking to those who they know won't understand and locking in their vote.
Read the March 2018 statement by Bowen, a masterpiece, which set the tone for the confusing media pieces and discussions that have followed.
Take one feature, the statement includes mention of "cash refunds" eight times. Not "tax refunds" or just "refunds". No, if you are trying to make the case that these tax refunds are somehow "shonky", cash gives a better spin. If you want to see how successful that little idea was, reflect on how often it appears in the media.
What is sadly missing is an investors spokesperson who can clearly explain the case so that even the non investor will see what it is all about and why it is so wrong. The Libs seem incapable.

March 13, 2019

Agreed on "cash" and I made this point elsewhere in these pages a while back. It's no more "cash" than any tax refund, but it conjures up images of shiftiness and brown paper bags - it's a deliberate positioning which says a lot about the Labor Party.

Jan H
March 11, 2019

If you are not convinced Labor is fighting a vicious campaign re its Plan, have a look at this ad (attached)authorised by Noel Carroll, Canberra, party secretary

March 12, 2019

On franking credits advertising, this is Bob 2:

March 13, 2019

The vicious campaign appears to be paying dividends for the ALP with the 2PP vote now at 54 to 46. I wonder what the the LNP can come up with to get back in the race.

Peter C
March 10, 2019

The people who say they will lose 30% of their income are either telling lies or don't understand what they are talking about. To lose 30% of their income would mean 100% or their super is invested only in Australian shares paying fully franked dividends. In other words they have nothing in cash or term deposits paying interest, nothing in shares (such as CSL) paying unfranked or partially franked dividends, nothing in investments held in a trust structure (e,g Sydney Airport or Transurban) nothing in property or property trusts, nothing in bonds, notes or debentures, nothing in overseas investments paying dividends (e.g Resmed or Apple).
If it really is the case that you have 100% of your super in Aust shares, then it is time you got a new adviser, change your investments or shut down your SMSF because you have no idea what you are doing. Nobody should have 100% in Australian shares paying fully franked dividends in their super fund.

March 11, 2019

"The people who say they will lose 30% of their income are either telling lies or don’t understand what they are talking about.":

My income is dividends from my private company with a tax rate of 27.5%.

Labor's enacted proposal would cut my income from $29,608 to $21,466. Ditto my wife.

As a retiree I am required to withdraw capital from super which will increase my personal capital, the yield from which, to avoid high marginal tax rates, will cause me to reduce the dividends my company pays me.

My tax rate on my dividends will remain 27.5% even should non-dividend income reduce the dividends as a portion of income.

Others might not have my flexibility.

Peter C
March 14, 2019

Then you have a very aggressive, high risk strategy, which can be dangerous when you are in retirement phase.

What would happen to the business (and thus your income) if we had a recession?

A good strategy in retirement phase should include a reasonable weighting to defensive assets such as cash, bonds and term deposits

The way I see it the real issue is you have all your eggs in the one basket i.e your asset allocation is not balanced, and not the ALP policy which is causing you issues.

Perhaps you could do with somebody independent looking over your asset allocation? (other than your accountant)

In retirement phase one needs a balance defensive and growth assets.

As they say bonds, fixed interest and property (REITs) are for income and company shares (public or private) are for growth.

Jan H
March 11, 2019

Peter C; Note Treasury Doc 22:
"The refundability of franking credits allows a refund of excess franking credits for entities whose tax liability has been reduced to zero. Providing refundability of franking credits allows taxpayers with a marginal tax rate below the company tax rate to receive a refund of tax paid by the company. This means, in effect, that the tax paid by the company is equal to the marginal rate of the taxpayer. In the absence of refundability, the taxpayer would, in effect, still pay tax at the company rate with any surplus franking credits wasted."

Company rate is 30%. So, Treasury confirms people will lose 30% of their dividend income.
With current low cash yield which is not keeping up with inflation, one would need millions to earn an income equivalent to fully-franked Aust shares.

March 09, 2019

Interested to see the results on changing investments as a result of the policy and I have the following observations to make.

One aspect to this Labor policy is that a lot of retirees with zero tax and not on the age pension, will start to sell their shares which generate franking credits, since they will lose the benefit from the cash these generate.

The shares will of course, be bought by others. And who will buy these shares? Well naturally, they will be bought by age pensioners, union funds, industrial funds, charities, not for profits and the wealthy. In fact, they will be bought by anyone who is either exempt from the policy or who can use the franking credits to offset their own tax obligations.

So it becomes pretty evident, that in the shifting of shares and attached franking credits from SMSF members into the hands of others, there will be very little gain for the government.

To make it worse, many financially worse off SMSF retirees just above the age pension asset limit will be driven onto the age pension, thus creating an even larger expense for Government.

I suspect in the end Labor's claim to save $5.9b a year by this policy will prove to be a gross exaggeration. I very much doubt that they will even gain $5.9m.

So why, is Labor hell bent on enacting this policy. Either they haven't done their maths or more likely, there is an ulterior motive.

I suspect the ulterior motive is being driven by the unions, and let's face it Mr Shorten was a unionist once and probably still is. So he would probably be quite happy to see the demise of SMSFs and all super monies rolled into industrial or retail super founds, gradually giving them more buying power and eventually exerting more control over companies. With unions in control of companies, who knows how things may turn out, but I suspect very badly for the general populace and ultimately a disaster for Australia.

Rita Nannes
March 08, 2019

Might be a simple question, but I cannot work it out.
When, at present, receiving dividends and franking credits as earnings (a.e. 70% div. plus 30% franking credits), what will happen if Labor's franking policy comes into play? Will earnings then have to be declared as 70% dividends without the need to add the 30% franking credits to your income?

March 09, 2019


We have not yet been told what will happen so we simply don't know. I doubt that this bit has even been thought out yet.

Presumably you will still need to add the franking to calculate taxable income, as anything else would result in a mess if you do owe some tax.

If you can use only some of the credit it would obviously be useful to include it. But calculating exactly how much of the credit you can use and just adding this bit would be a nightmare.

As far as your take home pay is concerned it makes no difference, but your taxable income is used for some benefits (eg seniors health card) and some extra tax (eg loss of health insurance rebate for your spouse).

If you go to the webpage for the Inquiry and look at submission 222 there is an example of how this would work in practise and what a nightmare it would be.

The submission is also available at

I would hate to be the poor soul who has to has to draft the legislation for this.

It is all very well saying it goes back to how it was before 2000, when cash refunds were not paid out, and we all managed then, but in those days the tax system was quite different.

The tax free threshold was about $5000, there were no rebates for health insurance, no adjusted taxable income calculations, and capital gains tax was worked out differently.

For capital gains you worked out the tax payable on 20% of the gain and multiplied this by five. Without going into too much detail this meant you could have the first $25k tax free if all of your income was capital gain.

As a result very low income earners eg stay at home mothers and retirees would sell the shares before they went ex-div and buy them back after they went ex-div. This way all income was capital gain. However this was actually quite a high risk strategy and it would be appalling if low income people were encouraged to go back to this. It would not work now in any case as the capital gains are taxed differently.

Harvey Dickinson
March 10, 2019

If Labor actually goes back to the Keating version then I believe it possible to be paying tax on income that you do not receive. This occurs when only part of your franking credits can be applied against tax payable and happens because all of your credits must be declared as income. Thus you have paid tax on that portion of your franking credits lost under this "fairer tax policy". In the past franking credits have also not been used to pay the medicare levy.

Jane Abbott
March 08, 2019

There is a very easy to understand article in the AFR today, in Opinion, by Adrian Blundell-wingnall.

“Labor’s Franking Policy is Theft from Policitally Weak”

This may help the ones that don’t fully understand how Franking Credits and tax offsets work for everybody, not just for retirees but for all shareholders.

March 07, 2019

The real issue of unfairness surrounding this policy is that franking tax offsets (around $34 Bn per year) are ro be retained yet FC cash refunds (around $6 Bn per year) are to be scrapped.
Both are budgerarily equivalent to each other. A $1,000 is $1,000 cash going out of the ATO. But a tax offset, where $1,000 of franking credits is deducted from an otherwise fully payable tax bill is clearly $1,000 of tax NOT coming in. There is no change in the ATO net receipts either way.
Tax offsets seem to be given an undeserved pass because those tax payers do pay some tax. The important consideration is that the amount of tax that they do NOT pay, as a result of the tax offset is exactly the same amount that could currently be claimed as a refund on the same dividend.
Fairness should be measured by comparing those adversely affected by the policy with those who still retain their FULL FC benefits. That is the high income earners, companies, big biz and even the major banks.

Bill Watson
March 07, 2019

It is probably not surprising that some of those supporting labor's policy, in saying that shareholders have not paid tax, are demonstrating their lack of understanding of how the imputation credits system works. A dividend imputation is simply a statement of the tax PAID by a shareholder. If that shareholder is in a zero tax bracket then that tax OVERPAID should be refunded. Labor itself does not seem to understand this principle.

March 07, 2019

I wonder how many retirees over the age of 65 are actually receiving the quoted $75,000 / $150,000 from their retirement savings.

I think you will find many self funded retirees do not receive that level of income.

In relation to "taxed twice" - the government introduced the imputation system so the dividends would not be taxed twice. Before the imputation system was introduced the company paid tax on its earnings AND the shareholder paid tax on what they received as dividends. This is where the term being "taxed twice" originated.

Before it was introduced, the politicians argued for the imputation system so you would not have to pay the company tax rate of 30% [as it is today - it was a different tax rate then] PLUS the marginal tax rate on the dividends - and it was implied by the pollies that some people may need to pay something like 75% in tax [using a 45% personal tax rate and a 30% company tax rate] - of course, the maths doesn't work out that way.

The proposed changes will cause further distortions in the superannuation system and I believe it is detrimental not only to today's retirees, but to many others in the future. I also believe there are many other avenues to solving the Federal problem than making the proposed tax changes and which would prove more effective in helping Australia pay its way.

So I will be taking up Mr Bowen's offer by not voting for him.

David Wilson
March 07, 2019

As an imminent retiree the proposed franking arrangements, if implemented, will cost me some income. However, on balance I believe Labor's franking proposal is beneficial to the Australian population overall and I am willing to support it. We are simply not paying enough tax to pay for our necessary Gov't services (medical, education etc).
SMSF fund members who are concerned about 'losing' franking credits should move to a retail or industry fund that facilitates them receiving full value.

Personally, I have found the level of misinformation and selfishness this issue has raised amongst retirees to be
very disappointing (though not surprising).

Graeme Bennett
March 07, 2019

Think about it some more. Labor will largely be taxing SMSFs in pension paying phase. You suggest switching to industry funds to continue to get the benefit of excess franking credits. How is this equitable? If Labor wants to raise extra taxes wouldn't it be fairer to tax all superannuation pensions, not just those paid by SMSFs? I would actually support that policy - I've delayed TTR for 6 years already because I believe we should all contribute where we can. Instead Labor is introducing a discriminatory policy that has little or no impact on pooled funds. Conveniently this leaves industry funds largely untouched. Conveniently half of employee representatives fees are channelled back to the union putting them in the position. Much of those funds are then made available to Labor for electioneering.

Labor is using hospitals and education as red herrings to justify a discriminatory policy. Is it fair to ask if your after tax income will actually be impacted by the proposed changes?

I believe the charges of selfishness and misinformation can be directed more widely.

March 07, 2019

Yes, tax all superannuation pensions at lower rate and allow franking credits as part of pension. The issue disappears.

March 08, 2019

"Yes, tax all superannuation pensions at lower rate and allow franking credits as part of pension. The issue disappears.":

Until next time a lazy treasurer is on the trawl.

Jan H
March 11, 2019

David Wilson:
"SMSF fund members who are concerned about ‘losing’ franking credits should move to a retail or industry fund that facilitates them receiving full value."

please read Graham Hand's article: "Not all super funds are the same when it comes to franking credits' --

"Some large super funds are receiving a refund that they will lose under the Labor policy. When it comes to franking credits, all public funds are not all created equally."
Other articles in the AFR have warned people to be very careful before deciding to move to an industry/retail fund. The apportionment of FC cash refunds within a fund is unclear. Not to mention that these big funds charge much higher admin funds than the small accounting firm charges for SMSF admin.

March 07, 2019


As one with a SMSF and one in favour of Labor's policy on both franking and negative gearing I interpret 12% as a strong endorsement given the nature of your readership. That 12% of largely well-off to rich people involved in finance and investing voted against self-interest might just be a canary of sorts.

Cheers, Jack

Graeme Bennett
March 07, 2019

You would need to do a bit more work before being able to assume all of the 12% were speaking against self-interest, let alone well-off to rich (what qualifies as rich?). We had one hedge fund manager posting here on the issue. He would benefit from a switch away from franked dividend paying shares. Unsurprisingly he supported Labor's proposals with very little of his reasoning supplied.

peter c
March 10, 2019

Rich is owning a home and $US1 million in all other assets. That qualifies as wealthy.

Graeme Bennett
March 07, 2019

PS Are you perhaps still in accumulation phase? The changes are unlikely to impact you greatly if you are, particularly in the earlier stages where the contribution tax will be offset against franking.

March 08, 2019

Sorry Jack, no self-interest from me, I am in a very large industry fund, still accumulating and will remain there in pension phase. This policy has no effect on my fund and will not have an effect until long after I have gone, if ever.

This is simply BAD POLICY being promoted with lies (Shorten and Bowen never mention that unions and political parties will be exempt - funny that!) which is why I voted against it in the survey. It discriminates against people who are not wealthy and have only saved outside super by way of a share portfolio (as they never had super in the old days). It is retrospective in its enforcement (ie current income levels from existing shareholdings get hit badly into the future) and exempts unions and political parties - "please explain"! I would vote for it on two conditions: no exemptions and it only applies to new investments, just like changes have been to CGT in the past.

March 24, 2019

Jack, If you read the 1299 submissions to date posted on the Inquiry website, you will find no submissions from those investors who, under Labor's plan, will continue to use their franking credits to reduce their taxable income (even to zero). Overwhelmingly, it is people over 65, some in their 80s and 90s and even one 100 yr old, whose incomes are, in most cases, just above the Govt Aged pension, have described how they will be financially disadvantaged. And these people are panicking, depressed, even suicidal. I guess this is huge self-interest. The plain fact is that Labor is demonising and discriminating against older Australians and individuals, some with disabilities, whose incomes fall below the tax-free threshold.
Re the fairness of this, I refer you to Jon Kalkman's article on the social contract re retirement incomes.

Wayne Ryan
March 07, 2019

I note that 75.8% of respondents opposing Labor's proposals give as one of their reasons that a company's profits should not be taxed twice.

Could someone please explain how a company is taxed twice if the dividend is paid to a non taxing entity such as an SMSF and the tax is refunded. Rather than being taxed twice, no tax is paid on that part of the company's income.

March 07, 2019

"taxed twice":

Once using current tax rules, then, if tax credits exceed tax payable, the Labor 'no refund' tax is applied.

"no tax is paid on that part of the company’s income":

No net tax.

Geoff Larsen
March 08, 2019

The first tax applied is the 30% company tax as given by the franking credit, attached to the dividend.

The franking credit is added to the cash dividend to give the
share owners taxable amount for the dividend.

The second tax is then applied, at the share owners personal marginal tax rate, to the taxable amount, to give the tax liability.

If the franking credit > tax liable, the difference is refunded in cash by the ATO to the share owner because they have paid too much tax in the first instance.

If the dividend is paid to a non taxable entity like an SMSF, the tax liability is 0 and the total franking credit is refunded. The same applies to a personal share owner who is under the tax free threshold.

If the difference above is not refunded to the share owner, the shareowner has been tax twice on that amount.

Graeme Bennett
March 07, 2019

An excellent survey. Good to see the range of responses, not just the usual formulaic spoon-fed stuff.

March 07, 2019

I was disappointed to see that none of the comments contained the word "communist", so the comments were not as emotional as they could have been!

March 07, 2019

25 pages of comments, with double columns! That has to be the biggest download of emotions on a proposed financial policy I have ever seen.


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