Westpac shows the way for banks to beat Labor on franking

Westpac's move to engineer three dividend payments in one financial year will "hopefully" spark similar moves from other big banks, says one leading fund manager, who described the tactic as a way to beat Labor's pledged changes to franking tax policy.

Westpac recently announced it would bring forward its interim dividend payment date by nine days to June 24 giving shareholders a one-off third dividend within the current financial year following an interim dividend last July and a full year dividend paid in December.

The bank has not linked the payment to Labor policy to end cash refunds on franking credits instead saying it was to speed cash returns to shareholders.

On Monday, Mark Freeman, chief executive at the the $7 billion Australian Foundation Investment Company (AFIC) said he believed Westpac had made the change with an eye to Labor's policy.

"What [Westpac] are saying, is that if there is a change in government and a change in franking rules you can still get a refund on the franking for dividends received up to the 30th of June this year," he told The Age and the Sydney Morning Herald.

Mr Freeman said he hoped NAB and ANZ Bank will join Westpac in bringing forward the interim dividend payment date to early June.

I would hope that the others are looking at it as well. Maybe it's just a matter of time.

AFIC's Mark Freeman

"I presume the other [banks] are looking at it, you would hope. I guess [Westpac] have just looked it and said 'yep that's the right thing to do' and I would hope that the others are looking at it as well. Maybe it's just a matter of time."

Westpac declined to comment on Monday.

AFIC, a staunch public critic of the Labor policy, also on Monday released the results of a survey it conducted of 14,300 investors which found retirees living off their investments relied on the current 18-year-old franking credit policy for "a modest quality of life".

The survey was sent to about 160,000 investors in AFIC and its related Mirrabooka, Amcil, and Djerriwarh funds.

Retirees packed into the Chatswood Club during the Parliamentary inquiry to voice their concerns at Labor's policy.Credit: James Brickwood

Hundreds of shareholders attended meetings in Melbourne on Monday to express their distress and anger about the proposed change.

"[Shareholders] don't understand why this policy is being put on them," Mr Freeman said.

"Franking credit refundability has been in place for 18 years and it forms a key part of their income. And you are basically taking away income that they use to live off. It is expensive to live in retirement...If you run a conservative portfolio the yields are very low. You don't earn a lot of income."

Mr Freeman said elderly retirees do not understand why they were being "attacked" and targeted by Labor after being incentivised for decades to build self-managed investment portfolios based on franking credit refunds.

Westpac is the first bank to bring forward interim dividend payments to beat Labor's franking credit refund policy. Credit: Dom Lorrimer

"That's just the system. The system is the system," he said.

Labor's Treasury spokesman Chris Bowen repeated earlier comments that AFIC and its related funds have already made public comments and given evidence to the "politicised" parliamentary inquiry.

"Politics is about choices – and Labor makes no apologies for choosing schools and hospitals over tax concessions that overwhelmingly benefit the wealthy," Mr Bowen said.

"The cost of excess imputation credits will soon outweigh what the Commonwealth spends on schools or child care. That’s unfair and unsustainable."

"The current system encourages people to be overweight Aussie shares meaning they have not adequately spread their risk."