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Have Your Say...

Welcome to the 'Have Your Say' section for 2019. We have received thousands of comments on articles over the years, but here is a chance for you to set the agenda.

We have moved the 2018 comments here.

Cuffelinks often receives emails from readers offering opinions on subjects not directly related to any article, including feedback on the weekly editorial in the newsletter.

While Cuffelinks is not licensed to give person financial advice and often cannot respond directly, 'Have Your Say' is a place where you can share your opinion and engage with each other.

Comments must meet our community standards with no product flogs and no personal attacks. Keep it respectful and constructive.

Comments relating to a specific article should be posted with that article.


John Wilson
April 29, 2019

There are two other pernicious effects of Labor's proposed policy on franking which have not received any comment.
Firstly, they propose to impose a 30% tax on family trusts at trust level, rather than at the marginal rate of the beneficiary, as at present. That may well be above the tax rates of beneficiaries who are not using trusts as a means of minimising tax, but could be using them as protection against legal claims.
Labor has given no indication of whether there would be any franking of the distribution, or whether there will be double taxation when the taxed distribution is received. Labor's thought bubble needs to be clarified.
Secondly, many people with modest income are able to qualify for the Seniors Health Care Card, provided their adjusted taxable income of a couple (ie taxable income including franking plus pre-tax super contributions) is below a threshhold, currently $86706. That certainly isn't "wealthy"!
There has been no comment from Labor on whether the adjusted taxable income would be changed to only include the franking credits that have been used rather than the full amount as at present.
Unless the system is changed, some people will lose this benefit which is important, primarily because it reduces the cost of pharmacy prescriptions from around $30 to $6. If one is unwell, that could be a significant impact.
Labor needs to clarify whether
- there will be "franking" on the tax on family trusts
- the basis for the threshold for Seniors Health Care Card will ignore unused franking.

April 26, 2019

Its actually the Greens that usually come second in Warringah, not Labor so with Zali & Abbott stoushing it out Labor may come 4th

D Hamson
April 26, 2019

If its a "gift", why provide that gift to anyone? Yet this proposal will gift franking to charities, endowments, the future fund, apra regulated funds and part pensioners.

Franking credits are included in your taxable income. Someone earning $14,000 in dividends with $6,000 in franking has a taxable income of $20,000. If you don't refund franking the after tax income is just $14,000, meaning effective tax (taxable income less after tax income) is $6,000 giving a 30% tax rate. Does the ALP want to tax low income earners at 30%?

D Ramsay
April 26, 2019

Re the Fr Cr issue I quote...
"Investors making changes such as these will ensure the $57 billion savings estimated by Treasury over a decade will not eventuate. Franking credits will be increasingly held by people who can use them, including large SMSFs, public funds and even charities (Treasury data shows 75 charities receive franking credits of over $1 million, worth almost $1 billion)" is proof positive that "thought bubbles" are not policies and that Shorten or Bowen (or both) can take a bow for lack of thought (i.e. stupidity) and a lack of research.

April 19, 2019

Most of the franking credits 'gift' is soaked up by people who are high income earners so whilst canning franking credits may be unfair to self funded retirees it is time to stop the feeding frenzy of the wealthy. They have enough outs of the tax system already and do not need handouts from taxpayers.

Terry O’Callaghan
April 26, 2019

Franking Credits are important for low income self funded retirees who have assets just above the threshold for receiving a part Government age pension. They will experience as much as a 10% drop in income dependent on the amount of Aussie shares held, making it difficult to make ends meet.

April 26, 2019

Yes exactly. Of the 1777 submissions to the Inquiry, most were from low income individuals who stand to lose 30% of their incomes [eg (if senior, divs $21K, tax paid $9K -- current income $30K. After ALP theft of TAX REFUND ENTITLEMENTS, a 30% reduction in income from #30K to $21K.
If no SATO, divs $14k, tax paid $6K, total $20K. After Labour theft 30% less at total $14K.
While employees on same income receive the refunds they are entitled to.

April 26, 2019

The franking credit refund policy of the Labour Party is not targeted at "high income earners", but rather it is targeted towards SMSFs. The true test of a Policy's intent is to look at the scenarios where the policy applies and does not apply:

Scenario 1: Retired Couple have $1 million combined in Super savings in an SMSF which they switch to Pension mode meaning that the income on their $1 million is taxed at a rate of 0. They have all 90% of $1 million invested in fully franked dividend paying shares. As the SMSF does not pay any other tax, this couple will not be entitled to the franking credit refund.

Scenario 2: The same retired couple switch their $1 million combined super savings to a superannuation fund (Industry or Retail does not matter). The switch to Pension mode meaning that the income of their $1 million is taxed at a rate of 0. They utilise the direct investments platform of their chosen super and have the same investments as what they had in their SMSF. As they are part of a large fund, it is highly probable if not certain that the Super fund is a net tax payer. In this case, the couple will be entitled to the benefits of the franking credit refund.

This policy is indiscriminate to the level of income earned by an individual, but rather is a policy target at reducing the wide spread use of SMSFs irrespective of the actual income someone earns.

I do not have an SMSF and do not plan on using one. I also do not benefit from Franking Credit refunds. However, I still think this is bad policy, as it can be easily avoided by changing tax structure. If this policy is passed, be sure that super funds will start advertising to SMSFs to switch to them to maintain their franking credit refunds.

April 26, 2019

Exactly. It is a case of Shorten and the Propaganda Komisar Bowen doing the bidding of their Union paymasters to push people out of SMSFunds and into union controlled Industry Funds.
Large SMSFs will take evasive action anyway.
The policy is self defeating -- to the extent it achieves that objective, the revenue projected will evaporate.
So a repeat of the disastrous management of Wayne Swan years with massive budget deficits.

April 18, 2019

"If you are getting a tax credit when you haven’t paid any income tax, this is a gift ...". This from Shorten and Bowen is a GREAT BIG LIE and it should be called as such by the LNP .
IT IS THEFT OF PEOPLES REFUND ENTITLEMENTS. A cute little mantra said endlessly with brevity and repetition. A total falsehood. For every $7 of dividends there is $3 tax withheld by company, just as they with hold tax from employees wages.
We must declare it as TAX, the ATO calls it OUR tax, we must include in tax returns [just as employees must declare gross income including tax with held not just what is in the weekly pay packet. Employees then have deductions -- which we will be denied under Labor -- effectively claims negated for SMSFs, tax affairs and donations [which will have a major negative impact on income from donations] .
The election may be winnable if LNP could get their act together and call Labor out: THIS IS THEFT/STEALING/CONFISCATION OF REFUND ENTITLEMENTS

Don Macca
April 19, 2019

John did you know, there are thousands of people not paying any income tax .They will get their GIFT of franking credits.
They are members of APRA funds which include industry funds.
Don't want to join a industry fund: prefer to run your own super fund. Bad luck no gift for you.
How can Bill say this is a fair go. Lets have a FAIR GO for every one.

April 23, 2019

Well stated John. You are 110 % correct.
Franking Credit must be referred as Other Income and it can not be a gift because one has to earn a franking credit.

Peter Wilkins
April 18, 2019

I find it hard to believe that Labour are going to take our franking credits. If you want to save money , look to skinny up politicians generous benefits , not everyday Australians.
this election may be the first time that we do NOT support Labour

Paul Torkington
April 28, 2019

An interviewer could skewer Shorten or Bowen on their slogan "libs are for the big end of town". Widow Smith has to lose $9000 franking refund from her $30000 SMSF retirement pension and manage on $21000 P.A. because the budget can't afford it. The same budget is paying $200+ and $300+ thousand dollar pensions for ex pollies etc and they aren't asked to give up a single $1.00 .Looking after the big end of town? The future fund has not yet paid any pensions. All from the budget.

David Close
April 18, 2019

What sticks in the craw is that this plan does not treat everyone equally. The only fair approaches would be 1. Leave things as they are OR 2. Abolish all franking credits, after a 2 year deferral to allow those affected to adjust their finances.

Lakshmi Krishnan
April 17, 2019

In specie transfer if it is not allowed, could result in a capital loss if you have to sell your shares at a time when the economy is sluggish in order to transfer your money to member direct.

Graham Hand
April 18, 2019

Hi Lakshmi, based on someone simply transferring from an SMSF to a DIO with the same shares, with a lag of a day or two, they are selling and buying in the same market.

April 18, 2019

For shares that have gained in value over the years, and for members in accumulation mode, wouldn't an in-specie transfer avoid capital gains tax if selling/buying from a SMSF to a DIO?

Graham Hand
April 18, 2019

Hi Peter, as far as I know, DIOs don't allow in-specie transfers (ie a transfer of the shares from one fund to another). They only accept cash. G

Jim Carlton
April 17, 2019

"If you are getting a tax credit when you haven’t paid any income tax, this is a gift" - when I buy and sell shares, I pay GST. GST is a Goods and Service Tax. Yes, I pay tax!

April 18, 2019

"I pay GST ... Yes, I pay tax":

No good, must be income tax paid by you.

Income tax paid by your employer or by your company and credited to you by ATO; all no good.

No refunds unless 'you personally' paid income tax 'in the first place'.

Maureen Styman
April 17, 2019

I am one of those SMSF that receives refunds for my franking credits. I am 76 years of age, commenced work when I was 15 and continued to work untill into my 60's. I receive nothing from centrelink and fully support myself. Following comments from Bill Shorten in your newsletter, I am also one of those who have recently had knee replacement surgery. For his information this surgery was fully paid for by myself and my health fund which is also paid for by myself.
I am at the stage I am planning to downsize and had planned to add more to my SMSF but if Labour is voted in I will go in the opposite direction into something more grand
and then hold my hand out for a pension. My Dad was a Labour man through and through but he would turn in his grave at how the Labour party has lost the plot.

Philippe Prudhomme
April 17, 2019

How cynical,
I will lose $30,000.00 in franking and it is just what we spent on private insurance and few surgeries between my wife I so far this financial year

Ray Walsh
April 17, 2019

Shorten says this is tax refund is a gift. I see this as no different to your normal tax return where you get a refund if you have paid too much tax. Are they all gifts? This could only be classed as a gift to the Labor party if they get in and get this passed. This is free money to them at the expense of investors that have taken all the risks.

April 18, 2019

Oh dear! The imputation system was designed to avoid double taxation of dividends. The changes made by Howard virtually abolished tax on companies completely, so if shareholders receive a refund of franking credits, there is NO tax payable at all.
How can that possibly be justified? Companies need to pay tax, in fact they pay $100bn a year. If all taxpayers got refunds, that’s a $100bn loss in taxation.
How can you, Cuffelinks, or indeed anyone, agree with or support that position?
And the funniest part of all this is that most of these people who are complaining are LNP supporters and voters, people who say they support low tax and fewer Government handouts!
In fact they have been shown to be just hypocrites!

Graham Hand
April 18, 2019

Hi Tony, we are a forum for opinion, so when you say: "How can you, Cuffelinks, or indeed anyone, agree with or support that position?", we are publishing many opinions. And we publish yours as well, and you are welcome to submit a more comprehensive article. G

April 18, 2019

"if shareholders receive a refund of franking credits, there is NO tax payable at all":

Only if all shareholders have a legislated 0% tax rate.

“goodbye to $100bn in taxation”:

Franking credits are tax credits for tax paid by companies – not ‘gifts’.

Shareholders are assessed for taxes on gross dividends (cash dividend received + company tax paid).

To come 'up to speed', read:

Warren Bird
April 18, 2019

Let’s do this once more. The imputation system from its earliest conception is about full integration of the personal and company tax systems. Which means that companies are only a tax collection vehicle and don’t really pay tax themselves. Just as a sole trader pays income tax at their own rate including earnings from their business on their tax return, so imputation means that shareholders do the same. There isn’t really any company tax, there is only income tax levied on shareholders.
The double taxation shorthand was merely a tool for explaining the impact at a time when few shareholders had a zero tax rate. It was never accurate.
The ALP knew this when they supported the introduction of franking credit refunds.

Denis Prodea
April 17, 2019

Well Bill let the companies directly distribute their earnings to their shareholders who invested their hard earned cash into them in the first place, without this potential Marxist Government creaming it off 1st. Then go to the shareholders and ask THEM for the tax on their income. How does your argument stack up then Bill! How many excuses can this mob try to concoct to steal money for their profligate grandiose but flawed ideology!

April 18, 2019

So let’s say goodbye to $100bn in taxation? What do you suggest we do to plug this hole? This is 20% of Government revenue. It will take a massive hike in other tax to make up the shortfall.
This debate has reached a frenzy stage, and the echo chamber all these moaners are in ignores reality. Companies need to pay tax, and shareholders are not entitled to a refund of company tax.
How hard is that to understand? It’s amazing how greed has overcome logic in this debate.

Warren Bird
April 18, 2019

Tony, what are you talking about? Total company taxation is just under $100bn, so I presume that's what you have in mind.

The system already imputes most of that as tax paid by individuals, across all the tax brackets. Hanging onto one part of the system - paying franking credits to those on zero tax rate - will not come anywhere near 'costing' $100 bn!

The way it works is that company profits are treated as being earned by shareholders. (My, my how radical and right wing!) The tax already paid by companies is imputed to them. Those on a higher tax bracket have to top up the difference between their bracket and 30%; those on a lower tax bracket either use the credit to reduce the tax they need to hand over on other income they've earned, or if their credit exceeds their other tax obligations they also get a refund of the excess tax they were forced to pay.

Company earnings ARE taxed and always will be taxed. But they're not taxed as an entity separate from their shareholders, but are taxed in the end at the individual shareholder level.

As I've written elsewhere, the end result is that total company earnings are actually taxed at a bit more than 30% because the average tax rate on shareholders is more than 30%.

I'd be very careful who I was accusing of failing to understand the system, the economic dynamic of how it works and be very careful making silly statements like 'greed overcomes logic'. It's all perfectly logical - and I've already commented elsewhere today to dispel the greed myth.

I prefer facts and analysis to emotional rants.

April 18, 2019

Tony, I agree with Warren Bird who has written several excellent articles that clearly explain the logic of dividend imputation, etc. See also, the Centre for Independent Studies, "Dividend Franking Credits Refunds: Principle vs Revenue" (refer CIS website), which concludes:

"Refundability of franking credits was introduced in 2000 after rigorous review of the relevant tax policy principles and has not been challenged by subsequent review of the tax system. As long as the imputation system remains in place, refundability is a LOGICAL component of it and should remain in place. Any move to abolish refundability for revenue-raising reasons would fly in the face of the sound principle on which it is based.
It is not clear how much additional revenue would be raised from abolition of refundability, but whatever the amount it is clear that it would be concentrated on a relatively small number of individuals and funds and would have a large absolute and percentage impact in some cases. The opportunities for taxpayers to rearrange their assets to avoid or minimise this impact are very limited.:

Further, the ATO website says:
“You are eligible for a refund of excess franking credits if all the following apply:

+You received franked dividends, on or after 1 July 2000, either directly or through a trust or partnership
+Your basic tax liability is less than your franking credits, after taking into account any other tax offsets you are entitled to
+You meet our anti-avoidance rules, which are designed to ensure EVERYONE PAYS THEIR FAIR SHARE OF TAX.

NB: The ATO clearly confirms that cash refunds are only given to those who pay their fair share of tax. If their fair share of tax is zero, then they have paid their fair share. So, following ATO logic, a taxpayer on a zero marginal tax rate is still a taxpayer. So cash refunds are not paid to non-taxpayers after all. Labor is also lying when it says that only entities and indivIduals who pay no income tax will be affected because unions, charities and the Future Fund WILL continue to enjoy cash refunds EVEN THOUGH THEY PAY NO INCOME TAX because they are also on a zero marginal tax rate..

The curious thing in Labor's plan is that back in 2000 when refundability was introduced, then Shadow-Treasurer, Simon Crean declared Labor fully supported it because it was, in fact, Labor policy which it took to the 98 election and which he said would assist low-income people. (see Hansard),

Gary B
April 17, 2019

Shorten's franking credit proposal will leave me short on how to pay for my council water and power bills. All labour is doing is penalising the people they are trying to support.

April 17, 2019

Shorten: "If you are getting a tax credit when you haven’t paid any income tax, this is a gift":

'If I let you keep any of your income it is a tax concession and a gift from me.'

Don Macca
April 18, 2019

If Shorten said : "If you are getting a tax credit when you haven't paid any income tax, this is a gift"?

Does he realise all APRA members not paying tax will receive their "GIFT" of franking credits. Surely he knows all industry funds are APRA Funds.

Everyone should read Wednesday’s “The Australian”. The front page details major changes to the Labor web site. They appear to have completely removed the sheet on superannuation. So it may be they are about to change their policy.

April 12, 2019

Re your comments on liquidity in your editorial. The spare cash is not going into the Australian share market so no bubble there.
The positive sloping yield curve does not indicate a recession is coming in Australia.

Not mentioned below, unemployment is at an all time low, so which ever Government wins on 18 May, they are lucky with good economic prospects.



Neville Smith
April 02, 2019

Has anyone else noted that Westpac's interim dividend will be paid in June 2019, instead of July? This means that 3 dividends will add to taxable income for 2019 rather than 2. Maybe someone can tell me why this expensive change is necessary?

April 03, 2019

Damn, just checked and yes they are. I wonder why? Means many of us will pay extra tax this FY.

Thanks for letting us know. We better keep our eye on the other banks.

April 03, 2019

Hi Neville, I believe their objective will be to help SMSFs to mitigate potential changes to the treatment of franking credits in 2019-20 FY after a Labor victory. Witness also the large number of share buybacks (BHP, RIO, CTX, WOW...) helping to distribute franking credit balances before they become less useful to some investors.

April 03, 2019

To avoid the changes in franking credits should Bill Shorten be elected.

Other companies that I have are also doing it.Suncorp with the special dividend paid in May,I think. Caltex with an off market buy back,I think Woolworths are also having an off market buy back

ANZ and NAB may or may not do the same.CBA is on a different reporting cycle
Possibly they may have an off market buy back before the end of the financial year,I don' t know.

Steve Martin
April 03, 2019

This is to get franking credits out before Labor gets into power and confiscates franking credit refunds in the 2019/20 year. The other banks have notes yet, made similar announcements.

April 03, 2019

I assume it's to do with bringing franking credits forward into the current FY before their status (probably) changes.

April 02, 2019

I am trying to find out whether deposits held in the name of an ASIC registered company (e.g. Company Pty Ltd) are covered by the Financial Claims Scheme (the Australian Government Scheme where deposits are protected up to a limit of $250,000) ?

I saw your article below from 2013 and thought you might know the answer and have the reference to the relevant legislation.


Leisa Bell
April 02, 2019

Hi Peter, Thanks for contacting us. I’ve had a poke around the government sites and found that the scheme is now known as the ‘Financial Claims Scheme’ and is administered by APRA. See these pages to answer your question:
Best regards,

John R
April 01, 2019

Dear Graham ,

I refer to your comment in your editorial, ‘ it’s a good story in this land of sunshine ‘

This is dead wrong as you have not addressed the electricity market part of the graph which shows that electricity prices have more than DOUBLED in the time

How this can happen given our resources, can only be the work of fools in high places .

The really crazy part is that the prices increases will continue .

I refer you to John Anderson’s article in The Australian around the same day explaining the effects of current renewable proposals .

There is also the little publicized fact that electricity production is only responsible FOR 25% of total emissions .

The rest is made up of mainly manufacturing, agriculture, and transport . The general public seems to believe that solar and wind will really help – they won’t

The whole debate on climate change is very shallow

Kind regards

John R

April 01, 2019

I would be interested in your views on the best way for an SMSF to access private equity?

Peter Matters
March 29, 2019

The issue I wanted to raise was that of access to franking credits.

I believe that foreign shareholders can obtain part of the benefit of imputed credits by lending shares to Australian entities for the mandated 45 days.

I have no knowledge how this works, but assume the borrower of the shares is paid a fee which he deducts from the credit obtained before handing the shares and the balance of the credit back to the foreign owner.

March 27, 2019

Good morning all & congrat’s on your continued good efforts.

A small request… am looking for a spreadsheet on the pro’s n cons of property investing.

I thought there was one contained in a very recent article that you provided, but for the life of me I can’t find it!?.

I tried to search for it but to no avail - can you help?

Bests - Michael

Graham Hand
March 27, 2019

Hi Michael

I don't recall such a spreadsheet, although we have published over 2,000 articles and I forget some of them.

Noel Whittaker has a good page on calculators, there may be something useful there.

And a couple of my older articles might help.

March 27, 2019

Top effort thanks Graham – that’s my problem too, read that many you sometimes forget where they were!

Bests to you and your team - Michael

Megan Brereton
March 22, 2019

I have to disagree with your article on the Royal Commission and financial planners no longer being able to charge advice fees to superannuation funds. We have a number of friends who, until the Royal Commission, were not aware that their advisers were deducting substantial advice fees from their superannuation funds. This may have been the fault of our friends but for the sake of transparency these fees for advice need to be invoiced and paid for separately to a superannuation fund. I look forward to this recommendation of the Royal Commission being implemented.

SMSF Trustee
March 30, 2019

Megan, I disagree strongly. And I say this as a client of an adviser, not as an adviser.

I WANT the fees I pay to him to come out of my fund, automatically, just the same as the brokerage when I buy shares in the fund, or the management fees charged by the fund managers with whom I invest. And just the same as I want the audit fees and administration fees to be netted off the fund returns.

It's administratively easier for me for it to happen that way.

But more importantly, to do things the way you propose, the result is that my gross income in the fund is higher than it needs to be for the 15% earnings tax to apply. A payment made to someone outside the super fund can't be deducted from income accruing inside the fund.

People who choose to invest in something simply have to take responsibility for understanding what they've done. If your suggestion came into law, then all those of us who do act responsibly will be disadvantaged.

Ian McClintock
March 22, 2019


In respect of your comment:

“realising that most voters have accepted the dominant science.(of climate change)”, I make the following comments.

1. Most politicians, including Abbott’s reactions are not a good indication of the veracity of the science of climate change. They wish to be re-elected and being aware of the changing electoral sentiment have had to pragmatically change their public face to suit.

2. Most people have no idea of the science.

3. So what does the science, which no one ever actually discusses, say?

1. Carbon dioxide (the principle gas involved) is only a minor greenhouse gas, operating effectively over a very small spectrum centred on the 14.9 um wavelength. This wavelength is also partially covered by the major greenhouse gas, water vapour. The addition of more greenhouse gas of any description acts with a logarithmically reducing effect on temperature. A doubling makes very little difference as saturation of the spectrum approaches.

2. Man's total contribution to the global increase in carbon dioxide is estimated by the IPCC at 4.3% (IPCC AR5). The increase in this gas from natural sources (ie, the Oceans and Terrestrial sources) is stated by them to be 95.7%.

3. Water vapour operates over a much larger wavelength spectrum range and is present in much higher concentrations. (eg @ 3%, (range ,<1% - ~6%) water vapour is present at over 73 times the concentration of carbon dioxide).

4. There is no way carbon dioxide can perform the dominating function claimed for it by the IPCC and its supporters, and there is not one piece of unequivocal empirical evidence that supports this contention.

5. Carbon dioxide on the other hand is absolutely vital, in fact fundamental, for all life on earth as we know it. Higher atmospheric levels of it are currently greening the Earth, a crucial factor to support the continuing increase in the world's population.

I add that this ‘mitigation’ effort comes at an enormous cost, running into billions of dollars, which has to be paid for and so adds to everyones costs.

Energy for example is an input into practically everything we produce and fossil fuels provide the bulk of it.

We need to think clearly and rationally about this issue.

March 28, 2019


The elephant in the room is global population growth.
since 1800 there is a 98% correlation between population growth and global temperature increase.

March 28, 2019

Terrence: have you got a chart showing that? Be wary of correlations eg the spending by USA on science, technology and space 1999-2009 nearly exactly correlates with suicides by hanging, suffocation and strangulation. For many other quirky similarities in charts have a look at "Spurious Correlations"

March 28, 2019

Ian: "5. Carbon dioxide on the other hand is absolutely vital, in fact fundamental, for all life on earth as we know it. Higher atmospheric levels of it are currently greening the Earth, a crucial factor to support the continuing increase in the world's population."

Observations of the plants in my garden, especially the veggies and fruits show no improvement in their growth rates or quality. In fact, quite the opposite. The increasing higher temperatures, significantly lower rainfall (drought) has resulted in fruit damage and lower yields, more leaf burn and plants dying.

While all the discussion focusses in CO2 emissions, methane is roughly 30 times more potent as a heat-trapping gas. As the planet warms, the permafrost is melting releasing methane into the atmosphere. So far, the impact of CO2 has been hidden due to its absorption by oceans, which are becoming more acidic, which has grave consequences for corals and crustaceans. CO2 also raises ocean temperatures and as we know, when water is heated water levels rise and ice melts. You can do this experiment in your kitchen. You don't need scientists to tell you this. Hence, rising sea levels.

"I add that this ‘mitigation’ effort comes at an enormous cost, running into billions of dollars, which has to be paid for and so adds to everyones costs."
The cost of extreme weather events is already in the billions. Insurance companies have been factoring this into their premiums for ages. Of course, the social costs of disruption is also enormous. What is the real cost of your home and business being destroyed and you are left with nothing?

Oh, and if you believe CO2 is vital for all life, may I respectfully suggest you attach yourself to a tank of pure CO2 and see how you thrive.

March 28, 2019

"Carbon dioxide ... is only a minor greenhouse gas":

The biggy is dihydrogen oxide. Less abundant in atmosphere over deserts.

'High desert regions typically have the greatest diurnal-temperature variations, while low-lying humid areas typically have the least.'

A very modest increase in global humidity might explain much of any warming.

Wayne Ryan
March 29, 2019

Ian McClintock

One thing I agree with you is that most people have no idea of the science.

This isn't surprising as the science is very complicated. We therefore have to take advice from the experts. All the science institutions in Australia such as the Australian Academy of Science, the CSIRO etc and their equivalents overseas have concluded that the climate is changing, that the change is mainly due to human CO2 emissions and unless we decarbonise the world economy, humans face an existential threat.

Given the near unanimous views of the world's scientists, I see little point in debating alternative claims from non-peer reviewed sources.

April 12, 2019

Wayne, I respectfully disagree. The science of the greenhouse is pretty simple first year thermodynamics. It's not that complicated. What is complicated is the effect of positive and negative feedback loops.

Garry Mackrell
March 22, 2019

The most important economic and financial aspect of the energy price chart trotted out by APRA is not that green energy prices have come down , it is that overall energy prices have risen from well below $40k/hr to over $100k/hour in 8 years.
The implication should be that subsidies can now be dismantled and the market place can make some rational, long term decisions as between the various energy sources we have at our disposal.
Pardon me for my cynicism but I suspect the virtuous will need to be prepared to continue paying even higher prices for their alternative energy hit.
Not a peep about the implications for Australia’s competitive position, cost structures, or our trade balance prospects or stability of our energy platform.

Ray Hendle
March 21, 2019

`re The timing on the second paper "Climate Change"

It's a BS story taken up (and in) by neophytes to that pseudoscience. Please cease sending me your CF as I believe you have lost all credibility.

John Upton
March 21, 2019

There's too much money being made by far too many people for climate change to disappear. What happens when the money runs out is anybody's guess. So everyone hangs in for the ride until it stops. And empires are still being built so why wouldn't you want to believe - it's a form of socialism where everyone wins.

March 18, 2019

Just wanted to expand on your opening paragraphs. The difficulty with financial advice is determining value. A medical consultation should result in problem solved in a short time frame. Financial advice takes time to take effect and may need constant monitoring over the longer term. You may only know if the advice was valuable in 12 months time with maybe some ups and downs along the way. Not simple or quick outcome even for those who are financially educated, and financial history is full of rip offs by so called experts.

March 21, 2019

I would argue that even 12 months is too short a time frame to determine if the advice was valuable or not (I'm not a financial planner btw).

M Cathey
March 30, 2019

I agree 12 months too short but where do you draw the line? I liken financial advice to drinking wine. If you buy wine from a merchant who says store this carefully for 10 years and it will be superb. You follow that advice and open it in 10 years time to find it’s vinegar and you know you have been had. Some investors have thought the advice they got was great for 5 years only to lose the lot in a GFC type event and find out the advice was highly risky crap. Experience comes from bad experience. I’m no financial planner either. I make all the mistakes on my own .

M Cathey
April 01, 2019

I guess there a few warning signs on assessing financial advice that can alert you to problems eg indendence, borrowings. But also you can to a certain extent back test a portfolio to get a feel on how it will perform in different market cycles but it’s not an exact science. The future can de different and the low interest rates world wide now give central banks very little buffer compared to the level they had just prior to the GFC. So one would expect a GFC type event now would be much more destructive and take longer to recover from than last time. I’m not sure how etf’s will weather that sort of storm. I don’t think spreading ones funds far and wide is really much help as in a major downturn everything falls except cash and one can’t get anything much of a return from cash

March 17, 2019

I wonder if others who have real property in their SMSF have been queried about valuing it to meet ATO requirements. I normally get the local RE agent to state: "Reasonable selling prices for the following properties in today's market would be in the vicinity of $X, $Y, $Z……..”
My accountant says this is not good enough and the agent or valuer needs to go into detail about methods of assessment, range of possible selling values, how the valuation was calculated etc.
Perhaps someone at ATO (reading this) can comment on this matter, or other readers with similar issue.

M A Cathey
March 18, 2019

My auditor is happy with Real estate agents assessment of value range. I take the mid point if that range and the trustees pass a minute to the effect that that price represents a reasonable assessment of market value. No problem from ato as yet and been using this process for 7 years. I don’t think ATO care as whatever value you come up with won’t affect the tax impost for that year. It’s just the superannuation Act that requires all assets to be at market value at year end. Reasonable attempt by an unassimilated third party(real estate agent) and I dint put any pressure in agent to come up with their assessment. I don’t care what the value that they come up with is. The only price that concerns me is the price I get when I do sell. Tell your accountant to come up with a reason why you would have to get a more detailed valuation and if he is adamant on his view get something in writing from the auditor as to why

March 21, 2019

Thank you. The accountant keeps saying ATO is clamping down ever harder, which then scares auditor, which then scares accountant. I have now asked the RE agent to pad out his report to appear more detailed, but the values will remain the same.

Greg Hollands
April 03, 2019

Better still Charles, get a new accountant!

March 14, 2019

Here are some interesting statistics ahead of the Federal elections: As Chris Bowen so famously said, “Australians are perfectly entitled to vote against us”. Good advice, Mr Bowen; we will!

Peter Grace
March 11, 2019

Here's a few thoughts on the Labour's current tax reform proposals from someone who has worked in the finance sector for many years and takes a broad view of all the discussions in the media.

Possible tax reform 2019
Let’s give this article a wider title than just ‘attacks on franking credits and negative gearing’.

Tax policy
Governments raise money through taxes to fund all the things we want (roads, schools, hospitals etc) and to pursue their policies to make the country a better place. Tax concessions are provided to support target groups (eg business R&D) or disadvantaged groups (eg seniors).
The trouble with tax rules and concessions are they get abused or overused and end up costing the Government more than they think is reasonable. As examples, the R&D rules have been revised frequently and Transition to Retirement pensions were exploited until 2017. Rules covering SMSFs have been radically changed over the years to remove rorts that followed the rules as written but not the spirit of superannuation.
So, proposals to change franking credits, negative gearing and capital gains discounts are just another phase of tax reform. To put it another way this is ‘legislative risk’ – the possibility that the rules could change and your strategy does not work as well as it did any more.

SMSF investment strategies
An investment strategy concentrated on Australian dividend paying shares is risky. It may work for a period of time but it not diversified. It is focussed on a small economy with a limited range of companies. Negative impacts on Australia, or mining or finance will have significant impacts on the portfolio.
Conversely, a diversified portfolio with international shares, local and overseas property, infrastructure and bonds will not suffer as much. It’s the first rule of Investments 101 – don’t have all your eggs in one basket.
Rule two of Investment 101 is to invest in quality assets and to treat the tax concessions as a bonus – not the reason for investing.

SMSF retirement strategies
Much of the commentary from the media, financial planners and SMSF trustees is based on the belief that ‘capital must not be touched and retirees will live off the income from the capital.
So, when interest rates are low, dividends are reduced (say in a downturn) or franking credits are threatened, all the cries are that retirees’ income will suffer. Remember when reduced drawdown rates for pensions were introduced after the GFC – this was only necessary because of this flawed belief.
The strategy might work when pension drawdown rates are 4% or 5% but it sure won’t work when drawdowns of 7% and above are required. A properly constructed retirement plan should start with the income that a retiree needs rather than them living on the income that the capital produces.
Some SMSF trustees may be disadvantaged by ‘doing it themselves’ and getting no advice or getting inferior advice.

Tax concessions
The real bias and flaws in the proposed tax reform are the poorly thought through concessions. As much of the commentary shows, there is very little logic in the concessions beyond chasing votes. And the churches, charities, universities and unions are not affected because they are tax-exempt anyway. What about the farmers, the property developers, small business and all the other worthy parties who deserve a concession?

Will the tax reforms work?
The goal of tax reform is to redistribute the revenue collected in taxes to worthy projects supported by the Government of the day – building roads, paying off debt, making housing more affordable etc. The estimates of the revenue to be gained were based on data from a few years back and don’t take into account the changing behaviour of investors. So, like the mining tax, the policies may be disruptive in the short-term for little long-term gain.
Better to have properly thought through and implemented reforms that stand a chance of being successful.

March 12, 2019

Thanks for the primary school lesson. Bit of a shame though that governments squander our taxes on populist issues to buy votes rather than do what needs to be done for the future of our country. I’ll keep trying to reduce my taxes legitimately thanks.

Tony Reardon
March 14, 2019

The franking credit is a statement of tax paid on the shareholder's behalf. When the shareholder, completes their tax return they declare the cash dividend plus the franking credit as income and the franking credit as tax paid. Any additional tax due has to be paid and any excess tax already paid is refunded. There are no tax concessions involved.
The Labor party proposal is to create an artificial, new distinction in tax law whereby some entities cannot receive refunds while others can. If “... churches, charities, universities and unions are not affected because they are tax-exempt anyway” why are SMSFs in pension mode which are also tax exempt. These quite specific provisions have clearly been crafted as an attack on SMSFs although they have also caught up individuals with share holdings who earn less than the $37,000 level.

Shiraz Nathwani
March 17, 2019

Well Done Tony an Excellent Comment.
Franking Credit IS Franking Income.

Bob Holland
March 21, 2019

It's a sad indictment on the Labor Government that they seek to punish self funded retirees when 50% of the nation's taxes are spent on providing welfare in the form of the aged pension. It is punishing people and encouraging them to arrange their affairs so that there is even more people requiring the aged pension and therefore creating an even larger tax burden. Too much of Australia's tax is spent on welfare and too little on the required infrastructure to take this country into the 21st century.

Greg Hollands
April 03, 2019

Peter, your portfolio theory is just that - theory. Having all your eggs in one basket is the "danger" apparently. How about some practicality. If your portfolio of investments is $50k, then it is somewhat an ask to get the coverage across all sectors as you suggest. No problem for public offer funds , or indeed someone like the Future Fund. I recall that my brother received about $10000 of shares in a demutualisation ( a number of years ago now) - he went to a financial planner who almost had a heart attack about how risky this was and advised him ( under his wise gaze) to sell $9k of those share and purchase 9 other parcels of $1k each and all would be well. I suggested ( when asked), that he should simply sell the shares and pay down his small debt - far more effective and "comfortable" result for him. So the importance of the theory is that it is just that - theory - and should be tempered by the situation of the client. Whose interest is supposed to be paramount!

April 13, 2019

Peter Grace: "A properly constructed retirement plan should start with the income that a retiree needs rather than them living on the income that the capital produces."

Well, exactly. So, let's say a person retiring at 70 needs a decent income to last for 20 years minimum. This would include, perhaps, funding a decent and safe place in an aged-care home, currently around $450,000 upwards, plus the daily rate) which that individual might enter at around 80-85. So, that means they need sufficient income to fund a modest living to age 80-85 with a minimum capital reserve of the 450K. (perhaps less if they have a home to sell to fund aged-care).

Now, Peter, given this income is predicated on a specific capital amount that will yield that income, and, if the capital is not enough to yield that required income, can you kindly explain from where the missing capital is derived?

The fact is that there is a necessary and ineluctable nexus between capital and income. And, it's equivalent to the chicken and the egg ---which comes first? A conundrum, indeed!

However, today's retirees have generally operated on the premise of saving throughout their working lives to accumulate as much capital as possible to provide the post-work income for 20 more years. And this strategy has been greatly promoted by LNP and Labor. Given the current dismal bank interest rates, the rational (and least-complex choice--bearing in mind that the older and frailer one becomes the more one wishes to sleep well) has been to invest in Australian shares preferably paying fully-franked dividends, preferably within a SMSF structure (under the bi-partisan rules operating since 2000).
Yes, definitely ASX shares carry a degree of risk but far less hassle than navigating fluctuating foreign exchange rates and uncertainties of directly-investing in foreign shares. And, without being fee-gouged by large, amorphous super and management funds where there is absolutely no control over one's capital, and one could be hit with all sorts of hidden charges.

March 09, 2019

I have a query regarding SMSF which couldn’t be answered by many so called SMSF advisors in Melbourne.
Can I setup SMSF if my current Super is Defined Benefit with Unisuper.
Secondly,my wife has SMSF.Can she buy collectibles including gold jewellery or pink diamonds from online selling sites like advertised Facebook Selling pages by common people.

Graham Hand
March 09, 2019

Hi GS, We are not licensed to provide personal financial advice, you will need to talk to a financial adviser.

April 17, 2019

GS: ATO website says: All investments by your SMSF must be made on a commercial ‘arm’s length’ basis. The purchase and sale price of fund assets should always re?ect true market value, and the income from fund assets should always re?ect a true market rate of return.

Investments in such items must be made for genuine retirement purposes, not to provide any present-day benefit.

Collectables and personal use assets can't be:

+leased to, or part of a lease arrangement with, a related party
+used by a related party
+stored or displayed in a private residence of a related party.

In addition:

your investment must comply with all other relevant investment restrictions, including the sole purpose test
the decision on where the item is stored must be documented (for example, in the minutes of a meeting of trustees) and the written record kept
the item must be insured in the fund's name within seven days of the fund acquiring it
if the item is transferred to a related party, this must be at market price as determined by a qualified, independent valuer."

Simon Russell
March 08, 2019

I note Graham Hand's experience in talking with a super fund's call centre: "one call centre person tried to convince me that investment management fees are charged on the fund's earnings, not the fund's balance". I had the same experience recently. After I broaching various alternatives ("what happens if earnings are negative, are fees negative? What happens if earnings are zero?" etc) I'm still not sure I convinced the call centre person that fees were actually calculated as a percentage of the balance. While the person I spoke with appeared to be trying to help, it's hard to be critical of fund members' poor financial literacy while we are giving them the wrong information on basic facts like fee calculations.

Btw, I did wonder about the legal implications of my conversation. Could a member who joins a fund after being told (and believing) that their fees will be calculated as a percentage of earnings be entitled to a refund when the fund subsequently charges (much higher) fees on a different basis? Any lawyers have a view on that?

John D
March 08, 2019

Dear Graham

Your editorial to Cuffelinks Newsletter Edition 296, where it touches on the possibility of switching from SMSFs to an industry fund in response to the present threat to franking credit refunds, misses a critical point. You may well be right that industry funds do not discount their investment management fees for larger account balances, but many industry funds (and also many retail funds) offer member choice options where the member gets to select their own investments from a defined collection of ASX listed stocks. This option may well be attractive to many self-directed SMSF members who are used to choosing their own investments. And the fees are quite modest. Australian Super for example charges 0.12% of the balance of the cash amount used for member direct investments, plus a Portfolio Administration Fee of $395. There is also their general administration fee and it is true that they do not accept 100% of your account being invested in Member Direct, so they still receive some volume of investment management fee income, but nothing like the $15,000 that you refer to. The total fees for a $2 million fund balance are likely to be lower than the $4,000 that you mention as being the cost of administering an SMSF.

For this reason I believe that the introduction of the ALP policy on franking credits will be a serious blow to the SMSF industry. I for one will shift to an industry fund. And so will many, many others, I predict, once the benefits of the switch are more widely known.

Notwithstanding this slight oversight, thank you very much for all your efforts with Cuffelinks, I always find your newsletters interesting and valuable.

April 17, 2019

John D. My local accountant charges me just under $2000 for SMSF Tax return including auditor fee. In comparison, I have a small accumulation amount (about $6k) in an industry fund and I can tell you the fees are disproportionately high. There's absolutely no way I would transfer from my SMSF to a big fund.

Also one thing people forget is that an SMSF in pension mode pays no Capital Gains tax, which has to be paid if one invests outside a SMSF structure. I foresee those SMSFers who understand the share market and do lots of their own research will look for opportunities in shares with overseas investments which can't offer fully-franked dividends but still pay dividends and have good growth prospects. The institutions will buy up the fully-franked shares and Labor won't get its predicted revenue.

It is also clear that the Banking Royal Commission has broken the model of investing in bank shares for growth and FF dividends (which has lasted since the 80s at least). And, Labor's plan will further compound this.

ivan beltrame
March 03, 2019

great reading -balanced - not part of the marketing industry

February 28, 2019

The upcoming election has significant change threats for many with SMSFs at least. Coupled with the earlier Liberal $1.6m legislative change it demonstrates that super saving planning and retirement security on the basis of one’s savings can be less sound than we all feel should be the case. After all a true national super system should be frame-worked such that the individual feels able to apply their strategies for saving and later drawdown with the normal “pub-test” security that any retiree category has the right to – given that they are mandated by a government system. With the constant changes to our super system by different governments over the time since inception the Plan simply no longer works as a government designed and “guaranteed” super system ought. All the risk is borne by the saver and retiree within a framework of onerous rules which keep changing whenever a government needs money!

Time to change to a national super system that reliably holds up so that we can plan securely for the future – with only the need to offset market risks! The new system should continue to provide individual choice of Plan vehicle but regardless all prescribed with equitably similar rules. Those rules should absolutely proscribe use of savings, earnings or fees for any other use than the administration of funds under management. Trade Union funds should not be able to channel member funds to TU and /or related Labor political ends.

March 05, 2019

My message is simple to anyone who asks what they can do re Labors franking credits policy, which will hurt millions of retireers over the next decade or as Mr Bowen said and DONT vote Labor, vote for someone else. Ask your children and grandchildren to do the same. Mr Bowens suggestion not mine!!

John S
February 24, 2019

Hello Graham

I am a self funded retiree who will be adversely affected by the proposed retiree tax. In my SMSF I have a large shareholding and both members are in pension phase. In looking at ways to minimise the effect I was wondering if it is possible to do the following.

Many LIC's and Superannuation Funds "lend" shares at a fee to short sellers. As it is not a sale they don't record it as a sale (no capital gain / loss) and only record the fee as income.

Is it possible for my SMSF to "lend" shares to my son for a fee? He is a fulltime employee on $89,000pa and he will be able to use the franking credits. The fee would be what we expect the dividend to be.

If it is possible and if so what is involved and how do we go about it?

Thank you


Graham Hand
February 24, 2019

Hi John S, we're not licensed to give personal financial advice and you would want specific advice to this properly and without tax risk, including the 45 day rule. From ATO:

"The holding period rule requires you to continuously hold shares 'at risk' for at least 45 days (90 days for certain preference shares) to be eligible for the franking tax offset. However, under the small shareholder exemption this rule does not apply if your total franking credit entitlement is below $5,000."

David Boase
February 23, 2019

In response to Warren's comments regarding my suggestion being an alternative to current tax laws surrounding "franking credits" and labour's proposed changes should they win the next election, the company would withhold tax (WHT) from the dividend paid to all non residents. This is the same as the current system where unfranked dividends are paid to non residents and tax withheld at a 30% rate unless the shareholder resides in a country with whom Australia has a double tax agreement, then the WHT is a rate of 15%. My proposal I believe overcomes the proposed inequities of the labour parties proposed changes should they become our government at the next election.
Under my proposal all Australian shareholders would receive their dividends before tax which would mean a larger amount than currently received. Shareholders would pay tax on the dividend at their tax rate. This would eliminate discrimination of shareholders concerning who & who cannot receive refunds of excess franking credits. Under my proposal there would be no franking credits.
I do not have any issue with the current imputation system, however I do have issues with labours proposed changes to franking credits.

Bill Watson
March 14, 2019

David. Regarding your comments that companies could distribute their dividends before paying tax, and leaving it to the shareholder to pay the tax, would be unlikely to be acceptable to the ATO. I suspect the ATO wants the tax up front and not wait 12 months or so for the shareholders to submit their tax returns. The effect would be the same as the current dividend imputation system, except the ATO would have to wait for its money.

March 21, 2019

David Boase and Bill Watson:

Before Keating introduced the div imputation system, many companies, BHP in particular, used to issue bonus shares which were treated as capital for tax purposes, not income. I recommend that to ensure their shareholders receive the full value of their "dividends", that they revert to issuing bonus shares. This would be especially beneficial to SMSFs in pension mode but would also suit individuals with taxable incomes below the TFT which currently receive their franking credits as cash. Such a move would completely stymie Labor's plan.

February 21, 2019

Re your newsletter:
Do you believe there is a difference in policy for the various alternatives below:

"A policy is inefficient if it has different impacts when super is held in an industry fund, in an SMSF, by a pensioner, by a pensioner on 28 March 2018, or in a wrap with mainly pension assets."

Why don't you include the following alternatives:

*govt super schemes
* retail funds

cheers Kim

Geoff F
February 23, 2019

Excellent points by Kim (above), I made similar points 2 my local Federal Labor member about July last year, but she didn't respond. To the above, can be added ... the Future Fund, and charities.
If a policy has so many exceptions, it isn't a good policy bcos it isn't efficient. Regardless of what one thinks of the GST itself, or the 10% rate, broadly it's a very efficient policy bcos of the limited range of exceptions.
When there are multiple exceptions to a policy, there are get-arounds - in the case of no refunds of imputation credits to SMSFs, the SMSFs could be closed down and $ transferred to an industry or retail fund, it's not rocket science. Despite some commentators' advice to just go ahead and do so, and stop arguing against Labor's policy, such "advice" misses the point, which is that, in my opinion, policy shouldn't have different consequences depending on which "vehicle" one uses to house their super.

David Boase
February 21, 2019

I agree with both Neal & Kuldip with one exception. A company does not and should not distribute the total of it's profits to shareholders (or after tax profits as is the current situation). The company needs to retain some profits for working capital including capital expenditure, to maintain & grow the business. My suggestion is the company pay the shareholders a % of their profits as dividends which are tax deductible to the company. The company pays tax on the balance and retains the after tax & dividend payments as working capital. The entities & individuals pay tax on the dividend they have received. There is no need for imputation.

Warren Bird
February 22, 2019

David, Neale and Kuldip you are all on the right path. One way or another the issue is integrating the personal and company tax schemes so that the owners of the company pay tax at their tax rate. For all tax payers, including those on the zero tax level as well as those on the top marginal rate.
Your suggestions are versions of the alternative that I've suggested, which is to have no company tax, but a withholding tax on retained earnings and dividends paid to foreign shareholders. The weakness in what you propose is that foreigners, who do not pay income tax in Australia, would also end up paying zero tax on their dividends, which I don't think is the outcome we want.
Which is why the imputation system was the way it was implemented - it actually works.

February 22, 2019

"no company tax, but a withholding tax on retained earnings and dividends paid to foreign shareholders": That would be identical to taxation of interest except for one aspect.

Where not all profit is paid as dividends, where some profit is retained, it would be taxed. When that taxed profit is paid to shareholders, the then shareholders could rightfully expect to receive the tax paid on that portion of the profit which was taxed. That would become recursive an require detailed records.

The franking credit method reduces record keeping to a single number: the franking credit account balance. Which is why it is in-place.

In contrast, all interest is paid out annually, none retained, and is not taxed as profit.

There is much law to prevent company owners from paying profits as though they were deductible like interest.

Neil Dearberg
February 21, 2019

When Mum n Dad own a hamburger shop, or a plumbing business, Mum n Dad, as owners of a private business, pay the tax on profit. Seems sensible that an owner should pay the tax. Why then, can't the owners of businesses listed on the stock exchange pay the tax? Simply distribute profits to the owners (shareholders) and have them pay the tax at their appropriate rate. Top income, top tax. Super fund pension income, no tax. No double tax, no inequitable company tax, no refunds.
Then of course, there is the risk profile of a business owner. Sometimes Mum n Dad go broke. Sometimes company shares don't trade well - even Aussie icons like QAN, TLS, AMP have caused great pain to their owners over near 20 years. Some distribution of profit may help these owners offset some risk to capital before capital destruction and possible onset of Social Security burden to all taxpayers....

February 21, 2019

I agree with you Neil Dearberg.
The profits of a company should be distributed before tax is paid by the company directly to the owners of the business as fully unfranked dividends.
Thus they will be no imputation credits to be claimed by tax payers on their Tax returns.
Instead all shareholders be they individuals or SMSFs or industry or retail super funds or institutions or corporates declare their fully unfranked dividend income as part of their total Income & pay tax on their applicable marginal rate .
As you say top income , top tax, Super fund pension income , no tax, no refunds, no double tax , no inequitable company tax .
It appears that would be too easy a solution to occur to or appeal to the Labor Party & indeed any political party .
perhaps those who are currently lobbying against the Labor Party's proposed changes to Super Pension Income & " tax refunds " should point this " solution" out to all our politicians .

Kuldip Kaur

Ralph Fryda
February 18, 2019

Dear Graham.
The solution to Labours Proposal re franking credits isnt explaining what they are because the people who arent affected dont care and if you try to explain there eyes glaze over.
The emphasis should be that everyone recieving dividends with franking credits HAS paid tax and if they recieve a refund it means they paid too much.

Wayne Ryan
February 21, 2019

Ralph, if someone receives a full refund of the franking credit, they haven't paid any tax, nor has the company as the tax the company paid has been refunded.

Bill Watson
March 14, 2019

Wayne, you are missing the whole concept of franking credits. The franking credit is simply a statement of the tax that the shareholder HAS paid. It that person is in a zero tax bracket he/she gets a refund of the tax overpaid. If in a higher tax bracket, then the shareholder pays the extra tax owing. This is only logical and fair.

Graham Hand
February 18, 2019


We send the weekend edition only to people who do not open the original. We realise many people are extra busy during the week. If you open it on Thursday, it will not come on Sunday. Otherwise, you could focus only on the weekend edition.

The articles stay on the website forever, and the links should continue working fine.

February 18, 2019

Thanks and keep up the good work - I really benefit from reading the independent perspective that your newsletter service provides.

I had joined the Cufflinks newsletter service some time ago but have been quite unwell over the last year or so and have not been able to keep on top of the inbox but health is now getting back on track and I am wanting to clear the inbox.

Accordingly I have many weekly newsletter and many weekend newsletter but it look like the weekend version will have all the content in the weekly version along with some updated editorial in the covering email so I think I can just focus on the weekend newsletter and covering email and disregard the interim weekly version is that correct ?.

How long do the weekly commentaries (ie the link to the PDFs with all the weekly articles) stay available on the website as it will take me a while to work through all my outstanding emails.


Douglas M
February 14, 2019

Graham, in your newsletter, you say some advisers have bought books of trails at three times the annual trail value. They get what they deserve now. How dare they trap their clients into products which might not suit them, simply to hang on to their trails. Best interests duty!!! No wonder Hayne said this has gone on long enough. So will the trail now be refunded to the client, or does it go somewhere else in the so-called value chain?

February 15, 2019

You have no understanding of these matters.
Many grand fathered clients are receiving service and attention from an advisor well beyond what they are paying. In many cases the product is still suitable. I have numerous client names I could post that when presented with the reasons to change and quantified benefits, did nothing.

February 14, 2019

It may be too big a job for the scope of Cuffelinks, but a rational discussion of the real rate of taxation of super would be handy.

Many young people look enviously on tax free pension payments, and claims of huge concessions on contributions and call for more wealth transfer back to them.

An analysis to counter Treasury tax expenditure calculation would interest many.



February 18, 2019

Hi Peter,

I'd be interested in the same but not something designed to 'counter', just factual. I've read that the tax concessions on super are growing in the government budget but pension dependency is conversely reducing but not anything on the size of each and projections. The current environment might be acceptable if young people were guaranteed the same environment when they retire but I am not holding my breath.

I am not aware of any media that regularly polls 'young people' or any group in a statistically significant manner but speaking for myself, I am simply interested in a sustainable tax environment. A change to taxation on earnings and income impacts the future and could not be described as a wealth transfer.

No one likes what is described as retrospective changes with impacts to retirement plans. I have been contributing extra to super for 20 years and my money is locked away and has been subject to significant changes regularly but regulatory change risk is the risk of obtaining the tax concessions today.

Jon Gosewinckel
February 14, 2019

Hi Graham, I've been reading Cuffelinks since inception but haven't seen anything, that I remember, that touches on the investigative work of Michael West ( He frequently writes about the Top 40 tax dodgers in Australia and how they squirrel away billions upon billions in tax havens like Bermuda or British Virgin Islands. For example, he states that Energy Australia has made over $30 billion in the last 4 years and paid no tax. He's also covering the potential sale of Healthscope which would lead to 40 hospitals around the country, subsidised by the taxpayer, that will fall into the hands of a company that's paid no tax in Australia despite earnings of almost $10 billion in the last 3 years. I don't profess to know much about the legalities and loopholes that allow this to happen but if it's true, and I assume it is or Mr West wouldn't be allowed to report it, why aren't the media at large shouting from the rooftops about it? And why isn't the government doing more to shut it down? We've had a Royal Commission into the banks, in these tough economic times should there be one into this practice of 'minimising' corporate tax? Maybe the tax garnered from franking credits wouldn't be required if these recalcitrant companies were encouraged to be good corporate citizens.

March 17, 2019

Jon Gosewinckel: Attached is a list of fossil-fuel companies that pay no tax.

David M
February 10, 2019

Graham, has anyone written about how to overcome the franking credit debacle for smsf investors. Whilst neither may be ideal, adding a child’s accumulation account and all its tax obligations could mute the loss of franking credits for the pension member. The other option seems obvious which is to move from a SMSF to a pension platform where one could probably replicate or transfer their share holdings. The cost could be even less than the existing audit and accounting?

Graham Hand
February 10, 2019

Hi David, yes, if you type 'franking credit' into our search facility (top right of home page), there are many articles. Cheers, G

February 10, 2019

Hopefully this will reach someone who knows and cares about financial planners software which is designed to charge clients egregious fees.

When platforms were introduced, I was an individual Planner licensed to Personal Investment Planners, from 1985, when BT introduced them in late 1988 or thereabouts, Most of my colleagues used them as they saved them work. I went to their seminars in upmarket hotels and after intense reviewing, never used them as they added another layer of fees to those already being charged by the Trusts

I retired in 2005 but was asked by a friend about around 5 years ago whether she should change her superannuation from a very good University members fund to a one recommended by her Planner, one of Amp’s subsidiaries. The Planner billed her for $1500. She showed me her latest statement: Each month the bills were individual charges for management, service, advice. She had been persuaded in 2008-9 to borrow 1/4 million from her bank. She lost half, but took their advice not to cancel as they would recover given enough time.

I told her that the fees exceeded the growth and on top she had bank charges. Suggested that she was digging a deeper whole and better to take losses and pay off her bank when she could. Also that she had been paying for advice over the years, and should not pay $1500 fee (which she paid) to move to the super fund as her university fund was earning more than the average fund.

February 08, 2019


Is anyone able to articulate 1) why it is appropriate to tax the profits of a company based on who holds it shares and separately but related, 2) tax someone based on a their age (re tax free super after 60).

Yes this is re Franking Credits. I know Warren has previously written this is the real issue (that some have a zero taxation rate). Has one of the many inquiries over the years covered this that I could read?

Steve Martin
February 10, 2019

Hi Think,
I would just like to address your first question on why we tax companies based on their shareholders' marginal tax rates.

You are right that at its heart our company tax system operates on the proposition that company profits are taxed at shareholder level. To understand why we do this, you need to understand the history of company tax and the options for alternatives. Yes there is an enquiry you can read – it deals with the original design of the system we have enjoyed for 18 years. If you read and understand it you will understand why so many tax professionals are appalled at the proposed Labor policy.

In summary when you have a system that taxes company profits twice – at the company level and at the shareholder level (as was the case prior to 1987); and in fairness you want to create a system that taxes company profits once; you have some options, you can tax at the company level (say 30% on all company profits) or you can do as is done with partnerships and trusts, use the company as a conduit and tax the profits in the hands of the shareholder. If the latter, is there a risk to revenue collection? In the interests of administrability, should tax be withheld at the company level to make sure that company profits are disclosed at the shareholder level? Voila! the Australian system.
If the Australian tax system did not have the withholding tax at the company level, but just taxed shareholders, would self funded retirees have been any better or worse off since 2000? No, they would have received untaxed company profits – ie $100 dividend instead of a $70 dividend with a further tax refund of $30 at tax time.

So, why not just tax companies? Because there would be a significant shortfall in revenue. While all of the attention has been on those shareholders who have a tax rate of under 30%, far more of our company profits are taxed in the hands of shareholders who are on a higher tax bracket. Also the tax burden on lower income earners is unjust and this plays into the present controversy. From here it is better for you read from the experts, the original architects of the present system and why it is the way it is.
In 1979 the Fraser government commissioned an independent review in to the Financial System. The Campbell Review reported its findings in a comprehensive report to government in 1981. Relevantly, its report into the taxation of company profits was set out in Chapter 14. That report is on a government website here.
The Review was considering the then double taxation of company profits: firstly in the hands of the company and secondly in the hands of the shareholder. The committee set a critical benchmark when it said at paragraph 13.8, that with some exceptions that are not presently relevant, “the taxation system should meet the tests of neutrality equity and simplicity.”
The Campbell Review set out in beautiful simplicity the company tax system we have now enjoyed for some 30 years.
In dealing with the system of imputation it described the tax paid at the company level as a “withholding tax” (at 14.39) and it contemplated as part of a full imputation system that there would be a refund of excess credits to lower income earners: at 14.40.
The report highlighted that company tax profits ought to be taxed once, effectively by reference to the marginal tax rates of the shareholder. In looking at the burden of tax, the report looked through the corporate veil and asked the central question at Para 14:
Quote “ the relevant question is how the individual shareholders overall tax burden compares with the tax he would have paid had the equivalent income been received through non-corporate channels and the whole amount being taxed at personal rates.” Unquote

It described as inequitable when the ‘effective combined company – personal income tax rate' is higher 'than the marginal personal income tax rate'.
The Labor proposal puts that inequity back into the system.
In setting out the blueprint for the present imputation system it recognised that such a radical new approach could adversely affect government revenue and so, as a first step recommended that refunds could be held back as an ‘interim’ measure.
To their great credit it was the Hawke Keating government that in 1987, gave effect to the “interim’ recommendation of the Campbell review. What Keating did was not, as represented by Shorten and Bowen, the original Keating model; it was the interim recommendation of the Campbell review.
The interim arrangements ended, as was recommended, following the Ralph Review in 1999. The legislation giving effect to refunds of excess franking credits was introduced under the Howard government and was passed, not surprisingly, with bipartisan support.
Our present system was designed by an independent body and was implemented with bi partisan support.
The proposed changes create inequity in the system is unfair to low to middle income earners and makes a shambles of the company tax system that has held us in good stead for nearly 30 years.
The proposal fails the essential integrity tests of equity and neutrality, and is and this failure is made worse by the exemptions given to unions and other not for profits and pensioners.
Should a potential Treasurer of our country understand this? Yes. So, why would a potential government create a policy that hurts lower income earners? Good question, some might point to political partisanship. According to one survey 80% of self funded retirees are LNP voters.

February 11, 2019

Hi Steve Martin,

Many thanks for the reply. I have located chapters 13 and 14 and will read some more.

I generally understand the inequity of the proposal but lament the absence of alternate proposals being lobbied for by those opposed, leaving it with 2 sides at 10 paces rather a debate on how our tax system should change.

Peter Thompson
February 12, 2019

Thanks for this clear and detailed history Steve Martin

Without wanting to get into an interpretive argument on a document that was written nearly forty years ago (unless one of that report’s original authors wants to respond), I think any claims that the Campbell Review in any way supports the status quo as it stands today are completely overstated. Section 14.47 talks about the “… minimum personal tax rate on company incomes allocated to individuals” (with the word minimum printed in italics in the report) without any hint that the authors contemplate that the minimum might be allowed to be zero. When the opening sentence of 14.39 states that a rationale for collecting a withholding tax at company level is "to protect government revenue” it’s clearly not protectionary to refund 100% of it to a shareholder. And yes, the very loosely worded 14.40 does contemplate giving at least some of the excess withholding tax back to the shareholder – but that is still a long way shy of supporting any conclusion that the report's authors contemplate that there are many, if any, shareholders who are on a zero tax rate and should get the entire amount of withholding tax refunded.

February 12, 2019

It would be very interesting to know what, across all shareholders, the average tax rate actually paid is, after all the franking credits and various individual tax rates are taken into account.

Do the shareholders on above 30% tax rates who own shares balance out the people on 0% and the other sub 30% rates? Seems that would be a useful weapon for either side to use to promulgate their argument, depending on what the answer was.

I daresay it's an unknown.

Warren Bird
February 12, 2019

Geoff, it's far from unknown. You underestimate the data collecting capacity of the ATO!

From their website you can easily find out that in 2015 the average tax rate across all individuals was 22%. That's total income tax paid divided by total taxable income.

There's heaps of detail too, so you can also work out for instance that in that fiscal year, only 4% of all franking credits were paid to individuals with a taxable income in the zero tax bracket. This was 575 thousand tax payers who received a total of $407 mn of franking credits. That's an average of $708 per tax payer in this low taxable income bracket.

You can get a heap of detail behind this, as well as the data for all the income ranges and tax brackets, from here:

And if you search around that page you can also get data on trusts and other types of tax payer, showing their franking credits in aggregate as well.

To answer your balancing out question, here's a bit more information by marginal tax bracket for individuals:

Bracket # of tax payers Total $ of franking credits
---------- -------------------- -----------------------------------

0% 575k $407 mn
19% 543k $760 mn
32.5% 887k $1,507 mn
37% 687k $2,465 mn
45% 192k $4,450 mn

So those on 45% marginal tax have to pay an extra 15% tax on the $4.45 billion of credits they've received, or $668 million. That more than offsets the $407 mn that is repaid to those on the zero marginal rate. Do this calc across all the tax payers and the system currently ends up bringing in $144 mn more from higher tax bracket shareholders than it gives back to zero tax bracket individuals. That's only 1.5% of the total amount of franking credits, so I'd say that on the whole the current system generates an average tax rate on shareholder earnings of 30%.

That tells me that the current system generates the right outcome, appropriately asks higher income earners to top up the tax paid on their shareholdings in order to pay back those on low brackets who shouldn't have had tax taken out in the first place. Therefore, the system shouldn't be played around with.

The more I look at this and the more I read the views of those who support the ALP's proposal, the more angry I get that so many people can't see a good policy when it's staring them in the face. The current imputation system is very good policy!

I say again, if some people are on zero tax who shouldn't be, then tax them, but don't mess with the imputation system.

alan johnston
February 07, 2019

Why aren't commentators/libs etc more actively arguing Shortens removal of excess franking credits be grandfathered as per their capital gains tax muted changes?Why one and not the other?
Surely a few more votes for the libs should they prosecute this position!

February 07, 2019

Hi Graham,

This financial year my wife are earning income from a rental property that is not in the SMSF.

We obviously will have to pay tax on that rental income as we have already reached our threshold of not taxable income outside of the super fund (we had to move money out of the super fund to minimise the SMSF taxation as a result of the last lot of changes by the Libs)

By paying tax will we avoid losing the franking credits in our SMSF?

Graham Hand
February 07, 2019


I am not a financial planner and I am not licensed to give personal advice. So I'll only make a general comment.

An SMSF is a separate legal entity with its own assets and tax return. Individuals are also separate legal entities. Income and tax positions from one legal entity cannot be mixed in with others. For example, if an SMSF makes a capital gain and a person makes a capital loss, they cannot be offset against each other.

But best to check with a licensed adviser.



February 05, 2019

Under the Shorten proposal re imputation tax credits, does 'taxable income' still include the value of the imputation credits (in a situation where those credits are not going to be refunded)? Surely it wouldn't be fair to pay tax on something that you never received, or is that the whole point?

February 04, 2019

I was wondering if anyone can shed any light on how HostPlus can charge such a low management fee for their Indexed Balanced Fund at .02%pa investment fee plus .05%pa Indirect Cost Ratio. It is hard to understand how they can run the fund so cheaply.

Graham Hand
February 04, 2019

Hi Megs, two main ways they can afford it. First, the indexing is provided using derivatives by a subsidiary of Macquarie Bank, and the cost to Hostplus is negligible. Many funds use the Macquarie 'True Index' product. Second, they charge a weekly admin fee of $1.50 which is $78 a year. On a small balance of say $1,000, that is 7.8%. Even on $10,000, that is 0.78%. But there's no doubt it's good value on large balances.

Tony Reardon
February 07, 2019

It is very difficult when looking at funds and comparing costs to do a true “apples” v “apples” comparison. While there is a published management fee (investment at .02%, $78 p.a. for Hostplus), there are further costs that are harder to take into account. For example, if the fund is invested in the Macquarie true index Australian equity fund, this charges a management fee of .103%; if invested in the the Macquarie true index international fund, this doesn't charge a management fee but has a buy/sell spread (5th Feb 1.0334/1.0292). There can be other hidden costs, for example, cash may be held in a related party account which pays low or no interest.
Of course, just because a fund has a high published fee structure, it doesn't mean that it too doesn't have further fees. Wherever there is a structure of funds investing in other funds, there may be level after level of fees.

Graham Hand
February 07, 2019

Thanks, Tony. It's my understanding after speaking to Hostplus that the 0.103% you refer to is the cost if a retail investors went directly to Macquarie and invested in the fund that uses that index. It is not the cost in the Hostplus structure, as Hostplus has negotiated an institutional rate with Macquarie which costs their fund very little, maybe nil or a point or two. Most institutions can find an index provider who will give them index exposure for a few basis points.

February 07, 2019

What's interesting about that then Graham, is that 3rd party risk where the derivatives are solely used to replicate the index are elevated, I'm certain not many understand the difference between synthetics and real assets and look solely at the price.

Don McLennan
February 03, 2019

Shorten's original plan was to only allow Franking Credits to be used to pay tax.
Laborl quickly changed so now SMSF's in the pension phase are the main ones to have their income reduced by this measure.
Most members of a SMSF in the pension phase with a balance below $1.6m will lose all their "credits". In my case i will lose 25% of my income. In fact i would be better off paying the 15% tax payable by those in the accumulation phase
Most high wealth individuals that Labor claims to target would have over $3m in "super".So they only lose their refund from this $1.6m portion
If i was an adviser i would suggest they reduce their holdings of companies paying fully franked dividends in their $1.6 section Mostly holding these in their section paying 15% tax.
They may even be able to place all their companies paying franking credits in the section over $1.5m If so they will not have lost any portion of their previous refund.
So it seems that the middle class who have saved hard & are now self funded retirees; will be the hardest hit.

Don Macca

February 01, 2019

Hi Graham

On your editorial from last week. Stock picking as entertainment:

"In early 2018, Barron’s had nine experts recommend securities they believed would outperform the market. The group made a total of 49 recommendations. The worst portfolio of recommendations by an analyst ended up losing 29%. The best was up 10%. If you had invested in the Smart Investor Index (invested equally across all 49), you would have lost 11.4%.

This compares to a total return performance of the S&P 500 of -4.4%. That is some significant underperformance!"

How Did Wall Street's "Smartest Investors" Fare in 2018? | News | The Emotional Investor | Financial Tools, Research

Andrew Varlamos
January 28, 2019

Graham, as you know, I completely agree with your argument here. The issue though is: what replaces it? The asset manager on stage or in print, or on the telly, has to tell a story to make it interesting enough for readers/viewers to stick with him/her, and be impressive enough such that they'll want to invest with him/her. This approach to marketing - better storytelling - is the next iteration in asset management marketing.
Andrew Varlamos

Graham Hand
January 28, 2019

Hi Andrew, I'm not criticising the fund manager for doing the marketing. I'm saying there's little point in the retail investor believing this is such a quality fund manager that they write down every word he or she utters, and then what ... go home and buy the stocks directly? If they think it's a quality manager with such great insights and ideas, give them the money to manage in their fund and go and lie on the beach.

Mark B
January 25, 2019

Graham, Agree with you on this. Sustainable long term investment results are generated by some sort of informational edge applied consistently (usually as part of a process aligned with investor beliefs). Some of the issues with stock tips are they don't take into account the whole portfolio, may be contrary to the portfolio style/process and are public so offer questionable information edge. At best they are a distraction from applying consistent investment beliefs with discipline. Arguably, the same can be said for much of the research that floods the inboxes of institutional investors.

January 25, 2019

Couldn’t agree more . It seems the quality of the stock picking is inversely proportonal to the amount of media time/ space some commentators receive. Charlie Aitkin was flogging Aristocrat Leisure for most of last year. So far it has cost me $20,000-plus.

February 03, 2019

Couldn’t agree more. One fund manager is a classic example of this. Great commentary, makes perfect sense, seems like a nice enough guy, but unfortunately that doesn’t translate to his funds doing well at all. Always sits on a lot of cash, I can do that myself. I’m sure he gets a lot of inflows though because he’s everywhere, all the time! Despite the ‘process’ he advocates, has picked some absolute shockers!

Raymond Page
January 25, 2019

Individual share portfolio's aren't built from 'stock tips' - they built brick by brick from making rational decisions based on fundamental valuations and decisions around sustainability of business models, quality of management, etc. and generally requires a buy & hold strategy - getting rich slow!

Easy to say - hard to do. I have built around 180+ individual share portfolio's for clients over 30 years and this formula has remained true throughout.

January 24, 2019

It was refreshing to read your comments on stock picking; some common sense at last!

This paper outlines structural reasons that explain why stock picking is futile:
Capitalism’s renaissance? The potential of repositioning the financial ‘meta-economy’ in Futures of Capitalism (2015):

January 24, 2019

On stock tips but more on the table which is Point in time return reporting – why can’t the industry abandon point in time reporting and go with cumulative returns or with rolling returns. I don’t see much debate around this or appetite to change and I often wonder if I am missing some agenda, or is it just laziness? Risk adjusted as well. With all the trillions in the system and the data, surely we have a better way?

The really swell guy.
January 24, 2019

Graham, one (maybe more) of your own contributors are guilty of talking up stocks they own, only to duck should they thereafter tank. Knowing lots of mum and dad investors seek their advice, after all it’s their face on the tv so there’s inferred trust, it’s pretty galling to have that stock-picker wash his hands and say he has no obligation to tell you when he has sold out. It’s costly, and very disappointing, and not professional whatsoever.

Paul G
January 24, 2019

On stocks tips, such wise words yet again Graham thanks for that!

January 24, 2019

You make an interesting and accurate comment that “Some great talkers do well for inflows despite mediocre results”.

I’m continually bemused by the amount of airtime across many channels, that some fund managers receive despite the generally poor performance generated by large teams across suites of funds.

On the flipside there are some fund managers that consistently produce excellent results, with barely a peep being heard from them – see MFF, Chris Mackay, for example.

January 24, 2019

Graham, if following the experts on stock picks is a waste of time, how does a person select stocks for their own portfolio?

Graham Hand
January 24, 2019

Hi Frank, if you want general exposure to the market then choose some type of index fund. If you think a fund manager is a talented stock picker, don’t follow their tips because you have no idea when they will change their mind. Just invest in their fund. Or if you like to do your own research and believe you have some special insights the market has not recognised, or you enjoy it, then give it your best shot.

But do you do your own dentistry, plumbing or electrical work, or like investing, does that not require years of training and special skills either?

Jan H
February 21, 2019

Frank, Graham H is right. Instead of following guru stock suggestions, you have to do your own research. Do they meet your investment strategy? Is the business sound, and is there a prospect of growth and what is that based on. Online brokers have heaps of info on their sites, plus charting tools, and research data. Then there are so many books on the subject. The ASX website also has lots of info.
Share investing is not a passive occupation. It takes lots of concentrated work and there are plenty of pitfalls along the way. But is very rewarding.


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