Cash Refunds Denial setting up Budget battlefield

The Tax Institute says that Labor’s proposal to deny cash refunds for excess imputation credits should not come as a surprise to anyone.

“It is what one could readily describe as the politically low hanging fruit – easily done with minimum legislative change; saves a bundle in revenue (some $11 billion over the 2018-19 forward estimates) and causes relatively minimal damage to Labor’s constituency” said Tax Institute Senior Tax Counsel Professor Bob Deutsch.

“It will however, cause some ructions (at least temporarily) in equity markets where tax refunds of excess imputation credits have been an important part of the investment matrix for equity investors, particularly self-managed superannuation funds.

“Individuals and super funds will find that, though this won’t result in them paying tax on any franked dividends they receive, they will not be receiving any cash back if their marginal tax rate is below the franking credit rate.

“This will be yet another important tax differentiator between the two-main political alternative governments. The next election is certainly shaping up to be a tax battlefield”, said Professor Deutsch.

ENDS

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The Tax Institute is Australia’s leading professional association and educator in tax. Its 12,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia. The Tax Institute supports the tax profession through education and professional development and works to continually improve tax law and its administration.