Labor have announced that if they get into Office, they are going to remove the imputation credit system for self funded Retirees.
So what does this mean? If you buy Australian shares, most large companies pay the company tax out of the dividend before they distribute to the shareholders. So by the end of the year most shareholders have the income in their bank acount that was paid by the company AND an 'imputation credit' certificate that shows how much tax was paid, by the company, on their behalf. At tax time, the shareholder can ask the ATO for the imputation credits back as a refund .... if they don't need them to offset tax they would otherwise have to pay. This is very attractive for Retirees who either hold shares in superannuation in a tax free pension (so they are guaranteed to get all the tax credits returned to them) OR fall under the tax free threshold outside of super... so also get their imputation credits refunded to them.
The Labor Party intend to stop imputation credits flowing to Retirees - unless they qualify for an Age Pension.
One of the unintended consequences of Labor doing this, is that it will prompt some self funded Retirees to spend their funds to get back onto the age pension. Self-funded retirees are already up in arms about Turnbull's attack on superannuation, and the unfairness of an age pension system which punishes thrift and rewards those who have saved nothing towards their retirement. The general feeling among self-funded retirees now is "what's the point?".
The cost of welfare in this county is growing at 8% per a year. All parties should be focused on encouraging retirees to become self sufficient and get off welfare. In my opinion, Labor's policies would do the opposite.
I have attached an article that oulines some of this impact from the Australian Financial Review. If you want to talk further about this matter, please don't hesitate to pick up the phone or send me an email. Remember, it is not in force yet, there is no election being called just yet - but I think its important we all start bringing awareness of this issue out into the open now, so ALL Politicians learn the full impact of their decisions. All for now, Julie