Mirrabooka first to bring forward dividend payment in response to threat of ALP franking credit hit

Mirrabooka has brought forward its special dividend payout due to fears about planned ALP changes to franking credits.

Mirrabooka chief executive Mark Freeman. Aaron Francis/The Australian

The $360 million listed investment company Mirrabooka has decided to pay its traditional end-of-year special dividend more than six months early as it looks to get ahead of the Labor Party’s vow to scrap the cash rebates retiree investors receive on franking ­credits.

It is believed to be the first public company to reshape its dividend policy in the face of the looming Federal Election that will likely elect Bill Shorten as Prime Minister, with other listed companies also now considering their war chest of franking credits and cash and how changes to franking imputation might negatively impact their shareholders.

Issuing its interim results this morning, Mirrabooka (MIR) chief executive Mark Freeman told The Australian that because of the uncertainty created by the dividend imputation policy released by the Federal Opposition last year, the fund believes it should pay special dividends now rather than wait to July when a Labor government might change the rules.

“The feedback so far is if they (ALP) change the policy then it will take affect from July 1 this year, so if they get that through as policy then from July 1 you will no longer get a refund cheque and so if you put out the special dividend this financial year people will still be able to have that as part of their return and potentially a refundable credit,’’ Mr Freeman said.

“So get it (the dividend) to them now, that is a key component of this result, and we think this policy is very grossly unfair for investors and trying to shift the playing field in favour of managed funds over self-managed superannuation.

“We are feeling the potential pain of people if this rule comes in, and so lets try to help them out now.’’

Mirrabooka has decided to bring forward its special dividend, traditionally paid at the end of the financial year, to be paid at the half year with 10 cents per share to be sent to its investors ahead of any possible rule change after the federal election.

Other companies, especially listed fund managers and other equity investors, could also soon follow suit as they restructure their capital management and use of stored franking credits to rush to shove money back into the pockets of their shareholders before the ALP is elected to government.

“The board felt it was prudent to pay this special dividend with the interim result given the policy uncertainty surrounding the future refundability of franking credits,’’ Mr Freeman said.

The nation’s biggest listed investment companies, which safeguard more than $40 billion invested in local shares on behalf of 400,000 Australians, are warning of dire ramifications for retirees, low-income earners, small business owners as well as broader capital markets as a result of the Labor Party’s planned changes to the franking credits system.

Last year, Mr Shorten unveiled a policy to claw back nearly $60bn over 10 years by abolishing cash refunds for excess dividend imputation credits.

But investors and corporate leaders have hit out at the policy. In November Australia’s most successful retailer, billionaire businessman Solomon Lew, sounded the alert over the Labor Party’s proposed removal of refundable franking credits, labelling it an “unfair” policy that will touch every member of the workforce as well as rattle the value of shares held in Australia’s $2.7 trillion superannuation system.

The government has also hit out at the proposal, with Federal Treasurer Josh Frydenberg recently saying: “The reality of Labor’s policy is it hurts those on lower taxable incomes. About 84 per cent of those affected have a taxable income of less than $37,000, and 96 per cent have a taxable income of less than $87,000.”