Federal election 2019: Franking credit changes proposed by Labor would harm many retirees, Murray Bridge accountant Heath Nankivell says

Liberal MP Tony Pasin speaks at a forum at Murray Bridge RSL last week. Photo: Peri Strathearn.
Liberal MP Tony Pasin speaks at a forum at Murray Bridge RSL last week. Photo: Peri Strathearn.

A Labor plan to limit cash payouts to shareholders would mean less income for many retirees, a Murray Bridge accountant says.

Murray Nankivell director Heath Nankivell made the remarks to about 40 people at a public forum hosted by Liberal MP Tony Pasin in Murray Bridge last Wednesday.

If it wins the upcoming election, Labor has pledged to change the rules around dividend imputation credits, given to shareholders to compensate them for the tax paid by the companies whose shares they own.

At present, they can either be used to reduce an individual's taxable income or, if he or she has paid no tax, paid out in cash.

Labor wants to end the latter practice, though it would exempt pensioners from any changes.

While he urged everyone to seek advice tailored to their individual financial circumstances, Mr Nankivell said a whole generation of Australians could be left "severely out of pocket".

It was not fair that a policy change should differentiate between investors who had bought shares and those who had bought property or another asset.

"You could have two people who went to the same financial planner, one who sought a growth portfolio and one who sought a dividend portfolio," he said.

"A dividend portfolio is more conservative ... this policy would penalise that person for putting their assets into a conservative portfolio, which doesn't make any sense."

Mr Pasin argued that all shareholders were entitled to franking credits, regardless of whether they paid income tax.

"If I'm a shareholder in a company, I own a sliver of that company," he said.

"When the company pays tax, for that really small sliver, whatever tax it paid ... was paid by Tony Pasin.

"That company paid tax at a rate of 30c in the dollar.

"If my effective tax rate isn't 30c in the dollar, I'm entitled to the difference."

He appreciated that Labor had intended to target the very rich, he said, but the policy would harm everyone whose income was taxed at a rate less than the company rate - everyone with a taxable income of less than $37,000 per year.

In response to the criticism, Labor candidate Mat O'Brien told The Standard the proposal was about fairness.

Having non-taxpaying shareholders claim cash refunds something no other advanced economy allowed cost $5 billion per year, he said, money that could otherwise be spent on schools and hospitals.

He said Labor would guarantee no-one paid extra tax and no-one received a lesser super contribution, pension or share dividend.

The franking credit policy was not the only one discussed at the forum.

Mr Nankivell also criticised Labor's proposals to limit the amount deductible for accountancy fees to $3000 per year, which would cost his business; reduce the capital gains tax-free threshold; and tax distributions from family trusts at 30pc, which he said would harm many farming families and small business owners.

"It's going to close doors, it's going to put people out of jobs," he said of the family trust proposal.

"It appears as though these policies were written by preschoolers."

Each of Labor's proposals will be scrutinised by the Senate if that party forms government after the election.

The Centre Alliance, which may hold the balance of power in the Senate, has already indicated it is not likely to support Labor's franking credit changes.

Member for Mayor Rebekha Sharkie said in February that her party would not support any legislation which would leave retirees worse off.

Shareholders and others affected by the policy changes are also likely to have a chance to restructure their finances should they need to.