This is what
the Australian Taxation Office (ATO) states about imputation:
Dividends paid to
shareholders by Australian resident companies are taxed under a system known as
imputation. This is where the tax the company pays is imputed, or attributed,
to the shareholders. The tax paid by the company is allocated to shareholders
as franking credits attached to the dividends they receive.
Dividends and franking credits
If you receive franking
credits on your dividends, you need to let us know your:
* franked amount
* franking credit.
If you are an Australian
resident, we will use this information to:
* reduce your tax
liability from all forms of income (not just dividends) and from your taxable
net capital gain
* refund any excess
franking to you after any of your income tax and Medicare levy liabilities have
been met.
You are eligible for a
refund of excess franking credits if all of the following apply:
* You receive 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.
If you have received a
dividend that has Australian franking credits attached from a New Zealand
franking company, you may be eligible to claim the Australian sourced franking
credits.
In March 2018
Federal Labor announced a policy effective
January 2019 which removes claims for franking credits
- but only in those years that the prospective claimant has no income tax
liability payable.
So ending
taxpayer-subsidised money for jam for around est. 9 per cent of the population who were receiving cash refunds for tax they had never paid .
Turnbull,
Morrison & Co then came out fighting – accusing Opposition Leader Bill Shorten of robbing low income self-funded retirees
and aged pensioners.
At that
point, somewhat predictably, embarrassment for the Turnbull Government began…..
What Treasurer and Liberal MP for Cook Scott Morrison considered low income retirees was elucidated.
A retired couple living
in a $2m house, with $3.2m in super, are classified as ‘‘low income’’. They
have no income tax liability. They could also have an investment property and
still wouldn’t have a tax liability because of the bizarre “senior and pensioners’
tax offset”, which lifts their effective tax-free threshold to about $58,000.
Turnbull & Co were accused of telling political lies.
You won’t have missed
the foghorn blast from the Turnbull government and its media amplifiers that
has accompanied Labor’s latest
bold foray on tax policy.
Scott Morrison has
declared Labor is stealing
tax refunds from pensioners and low-income retirees, and Malcolm
Turnbull says Bill Shorten “is going after the savings of your parents and
their friends and their contemporaries”.
So how do these
terrifying-sounding claims stack up?
Let’s bring in the
respected economist Saul Eslake, who has no political dog in this race. Eslake
is blunt. He says the government’s posturing is “misleading in the same way
that most of what Scott Morrison said
about Labor’s policy on negative gearing was misleading”.
To understand precisely
what is misleading – the first thing to know is when we are talking about
Australian retirees having low incomes, often what that means is people have
low taxable incomes.
Income from
superannuation funds is tax free once people turn 60. Eslake says the decision
to make income from super tax free is “top of my list of the dumbest tax policy
decisions of the last 25 years”.
It means people with
substantial assets, and big super balances – millionaires in fact – are in a
position to report low taxable income, and in fact structure their affairs to
ensure they have low taxable income.
They were also quite rightly accused of knowing that dividend imputation à la Costello is an expensive rort.
Treasury considered
dividend imputation reform in the lead up to Treasurer Scott Morrison's last
budget, creating a dossier entitled "Tax Policy - Dividend
Imputation" more than a year before Labor announced it would target the
tax refunds of more than one million Australians on Tuesday.
The confidential file
itemised in a list required to be disclosed by departments as part of freedom
of information requirements was opened by Treasury in the first-half of last
year.
Fairfax Media
understands Treasury has been examining withholding dividend cheques from
non-taxpaying shareholders ahead of this year's May budget.
Investigating potential
savings needed to fund budget initiatives such as personal income tax cuts is
normal practice in the pre-budget period.
Mr Morrison said on
Tuesday the "government has never entertained" changes to the way it
gives cash back to shareholders in response to a policy he described as a
"cruel blow for retirees and pensioners," but his predecessor
Joe Hockey first asked how dividend imputation could be improved - not replaced
- three
years ago.
A white discussion paper
on tax reform commissioned by Mr Hockey and completed by Treasury in 2015
found "there are some revenue concerns with the refundability of
imputation credits," indicating the department was receiving lower tax
revenues than it expected.
"It provides a
greater incentive for shareholders of closely held companies to delay
distributions until a time when individual owners are subject to a relatively
low tax rate, to receive a refund of tax paid by the company."
Labor, which has not
released Parliamentary Budget Office costings of its policy, said it planned on
cancelling an average cash refund of $5000 on share dividends from 8 per cent
of taxpayers, including 200,000 voters who self-manage their own super funds
and 1 per cent of full pensioners..….
Image found on Twitter
"Rethink: Better tax, better Australia" discussion paper information here and submissions here.
No comments:
Post a Comment