The truth about dividend imputation/franking credits that Morrison and Co are not telling you

“Example – low taxable income A self-funded retiree couple has a $3.2 million super balance, plus their own home, and $200,000 in Australian shares held outside super. Even after drawing $130,000 a year in superannuation income, and $15,000 a year in dividend income, they would report a combined taxable income of $15,000, and pay no income tax at all.” [Australian Labor Party, Fact Sheet, 2018]

In 1987 the Hawke Labor Government introduced legislation which changed taxation law regarding dividend imputation/franking dividends.

In order for tax on dividends not to be paid twice – once by the company issuing the dividends via underlying company tax on profits and once by the shareholding receiving those dividends – it introduced franking credits. Whereby the tax on dividends for which the shareholder has previously been liable was credited to them for use in a given financial year to offset all or part of their tax liability for that year*.

Any excess franking credits could not be used as there was no shareholder tax liability remaining to which these credits could be applied and, therefore no chance that any dividends were being taxed twice.

In 1997, 1999 and 2000 the Howard Coalition Government changed the rules on franked dividends until by July 2000 excess franking credits became fully refundable and a great many shareholders began to receive cash tax rebates from the Australian Taxation Office (ATO) for taxation that they had never personally paid.

Based on ATO 2014-15 figures people earning more than a million dollars a year received 17 per cent of franking credits and about half of all franking credits went to those who earn more than $180,000 a year. 

According to a study by the Australian Institute reported in 2015; the wealthiest 10 per cent of households – those earning disposable income of more than $207,000 – gain almost 75 per cent of the $10 billion in franking credits siphoned directly to them.

CommSec explains the franking credit system this way (retrieved 4 February 2019):

Dividends are paid out of profits which have already been subject to Australian company tax which is currently 30%. This means that shareholders receive a rebate for the tax paid by the company on profits distributed as dividends.

These dividends are described as being 'franked'. Franked dividends have a franking credit attached to them which represents the amount of tax the company has already paid. Franking credits are also known as imputation credits.

You are entitled to receive a credit for any tax the company has paid. If your top tax rate is less than the company's tax rate, the Australian Tax Office (ATO) will refund you the difference.

Case study: James receives a tax refund

James owns shares in a company. The company pays him a fully franked dividend of $700. His dividend statement says there is a franking credit of $300. This represents the tax the company has already paid. This means the dividend, before company tax was deducted, would have been $1,000 ($700 + $300).

Come tax time, James must declare $1,000 (the $700 dividend plus the $300 franking credit) in his taxable income. If his marginal tax rate was 15%, he would have paid $150 tax on the dividend. Because the company has already paid $300 in tax, James will receive a refund of the difference, which is $150.

If James was in a higher tax bracket he may not have been entitled to a refund of any of the franking credit, he may even have to pay additional tax. However, if he is a low [taxable] income earner, it is possible to be refunded the full amount of the franking credit…..

Refunding of excess imputation credits

The refund applies when your total imputation credits that are attached to your franked dividends paid exceeds your basic income tax liability for the year.

A cash amount can be refunded to you reflecting the amount of excess imputation credits, after applying them and any other tax offsets to which you are entitled to. This will in turn reduce your basic income tax liability to zero.

If you are required to lodge an income tax return, you can use it to claim a refund of excess imputation credits. If you are not required to lodge a tax return, the refund is available on application.

In other words, if “James” after deducting all other tax concessions available to him finds himself with zero tax liability then since July 2000 he has been able to claim a cash tax rebate from the ATO on tax he has never personally paid.

There are an estimated 1.1 million shareholders receiving this type of rebate on a tax they haven’t paid and they are currently costing the Australian Government well in excess of $5.9 billion each year. 

That’s billions of dollars that should rightly remain in Treasury to help cover the costs of things like national infrastructure, defence, health, education, aged care, pensions and other social services.

In 2017 the Labor Opposition announced that if it won government in 2019 it would return the franking credit rules to their original intent and no longer allow excess franking credits to be realised as ATO cash tax rebates – with the exception that shareholders who also receive a Veterans Affairs or Centrelink full or part age pension or an allowance would still receive a full cash tax rebate for their excess franking credits commencing July 2019.

Whenever Prime Minister Scott Morrison, Treasurer Josh Frydenberg or one of his other cabinet ministers and backbenchers like the MP for Goldstein Tim Wilson open their mouths on the subject of excess franking credits they are very careful not to let truth escape their lips - until such time as they get found out.

A case in point is Tim Wilson's financial interests. A subject which became sensitive once his irregular behaviour as Chairman of the Standing Committee on Economics'  
Inquiry into the implications of removing refundable franking credits became public knowledge.

This is a snapshot of a part of his financial interests. As a 50 per cent holder of equity in at least two investment/superannuation funds which may benefit from excess franking credits:

Register of Members Interests- 45th Parliament - Tim Wilson, excerpt February 2019

Tim Wilson is also an investor in funds run by Wilson Asset Management, a firm founded and chaired by Geoff Wilson with $3 billion in funds under management… Under an entry listed as a 'shareholding', Mr Wilson's register of parliamentary interests shows he and husband Ryan Bolger invested in a Wilson Asset-managed fund in May 2017 through the couple's self-managed superannuation fund. They invested in another Wilson Asset fund, WAM leaders, in December 2017.

It has been further reported in mainstream media that Chairman & Chief Investment Officer of Wilson Asset Management, Geoff Wilson, is in fact a relative of Tim Wilson and, that during one public hearing Geoff Wilson gave evidence before Tim Wilson as inquiry chairman and neither declared their personal or financial relationship. 

Indeed, Tim Wilson could now be considered ethically compromised  in his role as Chairman of the Standing Committee.

Australian Parliament, House of Representatives Practice 6th Edition

Wilson is a politician whose statements and opinions on excess franking credits cannot be trusted, heading a a parliamentary inquiry whose formal report and findings cannot be trusted.

So it is up to every voter to acquaint themselves with the facts. Make Internet search engines your friends between now and the May 2019 federal election if you want the facts on legislation and policy which is being debated in the media.

* Currently an individual's personal tax liability is calculated only on income above the first $18,200 which is exempt from taxation.

Loggers still breaching their environmental obligations in Northern NSW state forests

North East Forest Alliance, media release, 1 February 2019:

EPA ENCOURAGES ILLEGAL LOGGING BY REPEATEDLY LETTING FORESTRY OFF

The North East Forest Alliance is claiming there is no justice for forests after the EPA on Wednesday confirmed numerous breaches of the Forestry Corporation's Threatened Species Licence in Gibberagee State Forest (east of Whiporie) but yet again issued useless cautions and warnings rather than fines and prosecutions for these serial offenders.

"Over the past decade NEFA have exposed the Forestry Corporation committing thousands of legal breaches of their environmental obligations, with the EPA confirming hundreds more breaches in the last few months from NEFA's audits of Gibberagee and Sugarloaf State Forest", said NEFA Spokesperson Dailan Pugh.

"Yet the EPA have never taken the Forest Corporation to court, despite commitments to do so, and in January 2016 they made the political decision not to issue fines.

"With no consequences for their blatant breaches of environmental laws, is it surprising that the Forestry Corporation repeat them time and time again?

"If you or I went around illegally cutting down oldgrowth trees (hundreds of year old), clearing rainforest, and bulldozing roads through exclusions around threatened plants time and time again we would be put in jail, but the Forestry Corporation don't even get a fine.

"The EPA's regulation of the Forestry Corporation is farcical, though the biggest problem is that by their refusal to take meaningful regulatory action the EPA are fostering what Justice Pepper described in 2011 as "a reckless attitude towards compliance with its environmental obligations" Mr. Pugh said.

"On Wednesday, in response to a NEFA complaint made 2 years ago the EPA confirmed that the Forestry Corporation failed to adequately mark the boundaries of 50m logging exclusion zones around numerous individuals of Endangered heath Narrow-leaved Melichrus, and undertook logging operations and roading within their exclusion zones.

"The EPA also confirmed NEFA's complaints of reckless damage to hollow-bearing trees and recruitment trees, while also confirming that the Forestry Corporation was not following the requirements for selection of appropriate recruitment trees.

"Though we can't be sure the EPA found all the breaches we identified because the EPA won't tell us how many they found, and when the EPA invited us into Gibberagee to be show them in March 2017, the Forestry Corporation wouldn't let us show the EPA and ordered us out of the forest.

"When NEFA made its first complaint over Gibberagee in March 2017 we hoped the EPA would take action to stop the breaches, yet when NEFA did another assessment 7 months later we found the same sort of breaches were continuing unabated. We are still waiting for the EPA to respond to the last complaints.

"In October last year the EPA confirmed over 86 breaches of the logging rules identified by the North East Forest Alliance in Sugarloaf State Forest, south of Tabulam, at that time the EPA issued the Forestry Corporation with a Warning Letter for 72 and an Official Caution for 1 offence.

"The confirmed breaches included roading through a wildlife corridor, nine cases of roading in exclusion areas along streams, failure to retain the required numbers of habitat trees, and over 70 cases of serious damage to, and inappropriate selection of, marked habitat trees.

"While failure to retain the required number of habitat trees is called one offence, in practice the EPA found that they had retained 200 less hollow-bearing trees than were legally required.

"There were numerous other breaches that the Forestry got off scot free for, for example the EPA confirmed clearing within the marked boundary of the Endangered Ecological Community Lowland Rainforest but refused to take action on the grounds that because the "forest structure and species present at this location have either been totally removed or severely altered/damaged" it precluded identifying what it had been like before logging.

"The EPA chose to ignore that they and the Forestry Corporation had jointly mapped it as Lowland Rainforest some 6 months before it had been logged and cleared.

"These offences are a repeat of similar offences we reported a year earlier in the nearby Cherry Tree State Forest. Despite the EPA's assurances they were going to take legal action there for logging and roading 4.5ha of mapped Lowland Rainforest and recklessly damaging hundreds of habitat trees, they let the Forestry Corporation off scot-free.

"NEFA estimated in that operation around 1,000 habitat trees were likely to have been damaged or had excessive debris left around their bases, though the EPA justified their refusal to take any regulatory action on the grounds that while it was "likely" the damages "were as a result of harvesting operations", they were not able to prove "beyond reasonable doubt ... that the damage was [not] caused by some other means".

"There is no justice. The EPA's sham regulation is encouraging the Forestry Corporation to repeatedly break logging laws with impunity" Mr. Pugh said.

Less than 15 weeks out from a federal election and the Morrison Government continues to pile on the debt

According to the Australian Office of Financial Management as of 1 February 2019 the Australian Government’s gross public debt stood at est. $540.82 billion – up from $277.34 billion on 30 September 2013.

So in the space of 5 years and 4 months the Abbott-Turnbull-Morrison Government increased the nation’s gross public debt by est. $263.48 billion. 

That represents a rough average of over $4 billion borrowed from domestic and foreign sources for each month the Liberal-Nationals Coalition has been in office.

On Monday 4 February 2019 the Morrison Government will borrow another $400 million (not to be repaid till 2028) and on Wednesday 6 February another $900 million (not to be repaid till 2030) - $1.3 billion over three days.

Heaven only knows how much more debt Morrison & Co will pile on before the May 2019 federal election.

According to Stephen Koukoulas voters can add that additional $1.3 billion to this 28-year debt repayment schedule for just 29 per cent of the total public debt Abbott, Turnbull and Morrison racked up to date:

$19.0 billion - Nov 2029

$12.0 billion - May 2030

$13.9 billion - Apr 2033

$6.95 billion - Jun 2035

$12.0 billion - Apr 2037

$8.0 billion - Jun 2039

$3.6 billion - May 2041

$13.0 billion - Mar 2047

How old will you, your children or grandchildren be before this debt is paid off?

NSW Far North Coast – big on diverse marine wildlife with very few sharks

Dolphin pod on the move

ABC News, 31 January 2018:

Marine scientists monitoring the waters along the northern New South Wales coastline say the threat of sharks is overblown and they have the data to prove it.

The National Marine Science Centre at Southern Cross University and the NSW Department of Primary Industries (DPI) collected two years' worth of drone footage as part of the State Government's Shark Management Strategy.

Professor Brendan Kelaher and his team tracked marine wildlife at locations known for shark bite incidents including Lennox Head, Ballina, Byron Bay and Evans Head.

To their delight, they found a thriving and vibrant marine ecosystem and very few "dangerous sharks" among the estimated 4,000 large marine animals they counted.

"One of the outcomes of our data ... we know it's up to 135 times more likely to be a dolphin, which is really good news," Mr Kelaher said.

"Sharks are a little few and far between and what we saw was this other diverse wildlife, which we're excited about."

The drone cameras captured scenes of whales coming close to shore to feed and schools of dolphins.

One of the most breathtaking sights, Mr Kelaher said, were fevers of cownose rays congregating near surfers in complex geometric patterns.

Less common were sharks, which typically took hundreds of flights before one was spotted.

Cownose Rays

NSW Chief Scientist's interim report re Independent Review of the Impact of the Bottled Water Industry on Groundwater Resources in the Northern Rivers region was due on 1 February 2019

The NSW Chief Scientist and Engineer Professor Hugh Durrant-Whyte is currently conducting an Independent Review of the Impactof the Bottled Water Industry on Groundwater Resources in the Northern Riversregion of NSW.

As part of the review members of the Office of the NSW Chief Scientist & Engineer conducted consultation sessions in the area with stakeholders on Sunday 20 and Monday 21 January 2019.

The NSW Coalition Berejiklian Government was scheduled to receive an initial report from the Chief Scientist and Engineer on 1 February 2019.

This date, coming as it did during the period when there is a growing awareness of the ongoing ecological crisis cause by mismanagement of the Murray-Darling Basin water resources by federal and states governments, may explain why there has been no mention made by the NSW Government of this interim report in the media.

However, concerned communities and residents in the Northern Rivers region deserve to have this report made publicly available as soon as possible. Not conveniently hidden away until after the 23 March state election.

BACKGROUND

Environmental Defenders Office NSW, November 2018:

The NSW Chief Scientist & Engineer will provide advice on sustainable groundwater extraction limits in the region, as well as advice on whether the current or proposed groundwater monitoring bores are sufficient.

Local councils have been advised to suspend approving any new applications for water mining until the report is complete in mid-2019.

Since 2017, EDO NSW has been providing advice to clients in the Tweed valley who have concerns about the way in which water bottling developments are assessed, approved and enforced.

Water bottling – the extraction, processing and bottling of groundwater for sale - is controversial, as it can compete with other water users and have adverse impacts on groundwater-dependent ecosystems. These operations also generate considerable plastic waste and the water transport tankers can impact the amenity and safety of people living in rural areas.

With bottling looking set to expand in the Tweed valley, our Legal Outreach team conducted a workshop on water regulation and enforcement in the Tweed Valley to help the community understand and participate in the regulation of water bottling operations. We also drafted several letters to the local council on the approval process for bottling facilities in order to clarify the legal standards in the local environmental plan and the scientific studies needed to support a development application for a facility.  

With our assistance, our client produced a detailed report alleging ongoing and systemic breaches of development consent conditions for four local water bottling facilities and setting out the range of enforcement options available to Council. We then met with Council and briefed Councillors on their powers and responsibilities as the regulator under law. We were able to work constructively with Council to ensure the full range of investigation and enforcement options were understood and since then Council has taken decisive steps to ensure water bottling operations in the Tweed are complying with the law.

The Chief Scientist & Engineer is expected to provide his initial report by early February 2019, with a final report to be published in mid-2019.

A Liberal prime minister reduced to begging is a dismal sight

This was the public face of Prime Minister and Liberal MP for Cook Scott Morrison in 2019....

The Sydney Morning Herald, 1 February 2019:

Prime Minister Scott Morrison has boasted of an influx of donations to the Liberal Party as Bill Shorten inches closer to power and says he's unafraid to run a negative election campaign against Labor's tax changes……

I can say quite confidently that we are well ahead on fundraising in this election. We are well ahead of where we were going into the 2016 election and I have seen that from the day I stepped into the job," he said.

"Why? Because [donors] know I'm going to fight and they know I have that record.

And this was Morrison begging behind the scenes..................

Channel 9 News, 31 January 2019:

Prime Minister Scott Morrison has sent letters to former members of the Liberal Party, pleading for them to rejoin ahead of the federal election.

"I wanted to write personally and encourage you to rejoin the Liberal Party."

"We need everyone who believes in our values to become energised members of our movement," he writes.

A copy of the letter which was sent out by the PM. (Supplied)

The letter was signed by Mr Morrison, who was today on the campaign trail in Brisbane, and authorised by NSW Liberal Party State Director Chris Stone.

It was a captain's pick by the Prime Minister, which sparked the resignation of the dumped locally-endorsed Liberal candidate Grant Schultz, along with a number of disillusioned Liberal Party branch members.

The Morrison Government crossed the line and was caught out

The House of Representatives Standing Committee on Economics was charged by Australian Treasurer Josh Frydenberg on 19 September 2018 with conducting an Inquiry into the implications of removing refundable franking credits.

The Standing Committee is composed of:

Liberal MP for Goldstein Tim Wilson (Chair)

Labor MP for Kingsford Smith Matt Thistlethwaite (Deputy Chair)

Along with committee members

Liberal MP for Brisbane Trevor Evans

Liberal MP for Mackellar Jason Falinski

Liberal MP for Hughes Craig Kelly

Liberal MP for Reid Craig Laundy

Labor MP for Freemantle Josh Wilson

Greens MP for Melbourne Adam Bandt

And supplementary member

Labor MP for Hotham Clare O’Neil.

The Inquiry has received approximately 1,000 submissions and by 8 February 2018 will have held 11 public hearings.

To date no transcripts of those public hearings have been published, just partial lists of those giving 'evidence'.

On 31 January 2019 The Sydney Morning Herald noticed the structure of these public hearings:

With no formal witnesses scheduled for any of the 12 special economics committee hearings to be held across the country before May, Coalition MPs appear set to continue to use the meetings to rally against the Labor policy. At one recent hearing an MP went so far as to hand out Liberal Party membership forms to the audience.

The Standing Committee has issued a total of 5 media releases, 4 of which contained details of where and when Inquiry public hearings would be held.

However, this particular Standing Committee dominated as it is by Liberal Party MPs decided to go one step further.

Its Chairman began to advertise public hearings on social media by directing interested persons towards a privately owned website created in October 2018 which deliberately conceals ownership by using My Private Registration to block full details appearing on its Whois entry.

This is one such invitation on Twitter:

Now a number of people have attempted to take up this irregular invitation to register in order to obtain a seat at a public parliamentary committee hearing and found that registration could only be completed by having their name attached to an anti-removal of funding credits petition.

It should be noted that this privately-owned website carries no visible link to a privacy policy. So users of this site receive no undertakings that any personal information they divulge, such as name, gender, postal address. telephone number and address will be protected from exploitation.

One Twitter user remarking on the situation 0nn2 February 2019:

This petition text reads as follows:

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

I want to formally register my opposition to scrap refundable franking credits and the attack on full tax refunds.

This policy will:

- Unfairly target retirees who have worked hard and sacrificed for their retirement.

- Unfairly hit many people on low incomes, including hundreds of thousands of retirees that receive full tax refunds and with 97% of people who receive these refunds having incomes below $87,000.

- Unfairly target retirees on low incomes who will now face double tax, while those on higher incomes will be able to reduce their tax bill by the full value of overpaid tax.

The impact of the retirement tax has not been thought through. It will directly harm my financial security. It should be abandoned.

Right at the bottom of the website’s home page is this alleged authorisation:

The placement of this authorisation appears to authorise both the website and the digital petition and, the individual doing the authorisation is Tim Wilson in his role as Chair of the Standing Committee on Economics Inquiry into the implications of removing refundable franking credits.

Under the leadership of the Member for Goldstein this parliamentary inquiry has lost what little legitimacy its Terms of Reference bestowed and it has been turned into a public manifestation of taxpayer-funded Liberal Party political campaigning against one of the Labor Opposition's current policy positions.

The political dishonesty of the Standing Committee on Economics and this blatant attempt to deceive the general public, stack the hearings with people who support the Liberal Party's position and deny registration to those that didn't, cannot be ignored.

It is my honest opinion the Chair of the Standing Committee on Economics by his actions may be guilty of contempt of parliament, and therefore may be liable to be prosecuted under the provisions of the Parliamentary Privileges Act 1987.

Wilson may have shrugged off comment by mainstream media, but he reacted to Twitter (and the fact that at least one person appears to have approached the Australian Parliament to express concern over the Standing Committee's actions).

Here he is alleging an error had occurred when setting up the digital petition which supposedly remained undiscovered for about three months:

UPDATE

An IT savvy journalist Richard Chirgwin has tweeted that the stoptheretirementtax domain is registered to BERFAWN PTY LTD, an  ATO Regulated Self-Managed Superannuation Fund first registered by ASIC in 1993. 

This super fund is possibly associated with Lawrence Gerard Mccrossin.

The Conversation, 8 February 2019:

On Monday, a page for the inquiry was added to the Australian Parliament’s website describing itself as the “the official page of the committee”. It states that submissions to the inquiry can be made via the Parliament’s submission system or by email. It also explains that “pre-registration is not required to participate” in the hearings.

The Guardian, 8 February 2019:

The fund manager Geoff Wilson has admitted to part-funding the website through which the Liberal MP Tim Wilson has coordinated opposition to Labor’s franking credit policy, while chairing an inquiry into it.

Late on Friday Geoff Wilson issued a statement clarifying his involvement in stoptheretirementtax.com.au, after a growing controversy over whether the pair – who are first cousins once-removed – have inappropriately politicised the parliamentary inquiry.

On Friday Labor asked the Australian federal police to investigate whether Tim Wilson inappropriately shared electoral roll information for commercial purposes while campaigning against the opposition’s franking credit policy.

The referral was based on a Fairfax Media report that a constituent of Wilson’s received material both from the Liberal MP and from Wilson Asset Management, the funds management company chaired by Geoff Wilson, after responding to a robopoll.