Argo chairman Russell Higgins says Labor’s plan to scrap franking credit refunds is “inequitable”
ARGO Investments has vowed to continue its fight against the Labor Party’s plan to scrap franking credit refunds, claiming it would unfairly affect low and middle income earners.
- Argo lifts full-year profit but warns of impact of royal commission
- Labor plan to scrap franking credit refunds
ARGO Investments has vowed to continue its fight against the Labor Party’s plan to scrap franking credit refunds, claiming it would unfairly affect low and middle income earners.
Addressing the company's AGM this morning, chairman Russell Higgins said the company strongly opposed the plan on the grounds it would have a “fundamentally inequitable impact”.
“To suggest that taxpayers with a zero marginal tax rate have paid no tax is wrong – the company has already paid tax on that dividend income on the shareholders’ behalf,” he said.
“If implemented, Labor’s policy would unfairly and disproportionately affect many individual and SMSF investors. It would have a particularly negative impact on low-and-middle income earners.
“For Australian shareholders reliant on the income from refundable franking credits, the policy would amount to a 30 per cent tax increase.”
Mr Higgins, who took over as chairman in July, said Argo had recently made a submission to a parliamentary inquiry into the removal of refundable franking credits, while submissions would also be made by the Australian Listed Investment Companies Association and the Listed Investment Companies and Trusts Association.
Argo posted a $218.9 million profit last financial year, up from $211.5 million, and delivered its more than 84,000 shareholders with dividends of 31.3c dividend.
During the financial year, the company purchased $259 million of investments, including reinvesting the proceeds of $201 million from investment sales.
Managing director Jason Beddow said Australian companies continued to deliver healthy earnings and capital growth, but challenges remained in the Australia economy.
“Earnings estimates have fallen, but Australian companies are still expected to continue growing at circa 7 per cent on average in FY2019, and profits are expected to grow in every sector except telecommunications and transport,” he said.
“While we are wary of what appears to be an overstretched consumer at a time of high household debt levels and increasing costs of living, including the surge in energy prices, we expect the domestic economy will continue to grow, with unemployment relatively low and interest rates at historical lows.
“Outcomes from the (banking) royal commission, combined with a softening housing market and tighter credit, overlaid with a run into the next federal election, are potential areas of concern as we move into 2019.”
Mr Beddow is particularly bullish about Macquarie’s prospects in the wake of the banking royal commission.
“We expect that the final recommendations will result in higher regulatory and remediation-related expenses as well as an elevated level of fines,” he said.
“In contrast, Macquarie Group is a truly global business with multiple avenues of growth and has relatively little exposure to the impacts of the royal commission.
“A key strength of Macquarie is its entrepreneurial culture, the quality of management and the company’s ability to pivot the business when they see opportunities.”
Macquarie is Argo’s second biggest holding in a portfolio of 93 shares, behind Westpac and ahead of ANZ, BHP and Wesfarmers.
In the 12 months to September, the best performer in Argo’s portfolio in terms of share price was Santos, which rose more than 80 per cent, while CSL, Premier Investments, Macquarie Group and BHP all increased by 40-to-60 per cent.
Argo-managed global infrastructure business, ASX-listed Argo Global Listed Infrastructure (AGLI), posted a $16.2 million profit last financial year and delivered its first fully-franked dividend of 2.5c in the second half.
“With a strong balance sheet and no debt, AGLI has entered the new financial year in a sound position to benefit from a growing global listed infrastructure sector,” Mr Higgins will tell shareholders at the company’s AGM this afternoon.
“AGLI’s portfolio is comfortably outperforming the sector benchmark and returns have proven to be less volatile than the broader market.”