Franking credit law ‘will hurt retirees’, says Coalition

The Coalition says people aged over 75 and superannuation funds are among the most affected by new laws to curb the claiming of franking credits.

Opposition Treasury spokesman Angus Taylor accused the Albanese government of another broken promise and one that would unfairly hit retirees who were more exposed to cost-of-living pressures. Picture: Getty Images

The Coalition will open a new front in its war against Labor’s crackdown on concessional tax breaks, accusing Jim Chalmers of planning a further raid on the ­nation’s retirement funds, with people aged over 75 and superannuation funds being among the most affected by new laws to curb the claiming of franking credits.

It comes after the Treasurer on Monday was forced to admit the government policy to double the concessional tax rate for super balances over $3m would affect 10 per cent of workers within 30 years’ time.

Anthony Albanese vowed before the election that Labor had no plans to touch either super or the franking credits system.

The government will on Tuesday introduce legislation to parliament that would make changes to franking credits that would deliver almost $600m in budget savings over the next five years.

The tax paper released last week by the government ahead of its announced changes to super tax treatment, found the largest beneficiaries of franking credits were those over 75, Australian companies, Australian super funds and Australian charities.

Opposition Treasury spokesman Angus Taylor accused the Albanese government of another broken promise and one that would unfairly hit retirees who were more exposed to cost-of-living pressures.

“In a cost-of-living crisis, Labor’s priority seems to be coming after your money,” Mr Taylor said. “The Prime Minister and the Treasurer went to the election promising Australians that they ‘wouldn’t touch’ franking credits and yet in six months they’ve added two tax grabs on Australian shareholders.

“This is just another tax on super. Another tax on Australians’ retirement savings. And another broken promise on tax.

“Labor promised Australian retirees and shareholders that after the 2019 election franking credit changes were off the table.”

The annual tax expenditures and insights statement, released last week by the government, showed more than $17bn in franking credits were claimed by individuals in 2019-20. It said the majority were claimed by high-income earners but the largest group were older Australians.

“Around 88 per cent of this $17.2bn in franking credits were received by people with above median taxable income, including 68 per cent by people in the top taxable income decile,” the paper said.

“Around one in five (19 per cent) of people receiving franking credits were in the top income decile. They received an average of $19,300 of franking credits.

“Around the same number of men and women received franking credits in 2019-20, with men receiving a higher amount on average. Overall, men received around 54 per cent of the franking credits … to resident individuals.

“Those aged 50 and over received nearly three-quarters (72 per cent) of the credits received by individuals, with the cohort aged 75 and over accounting for the largest number of individual credit recipients (395,000), highest average amount received ($7357), as well as the largest share of credits received in aggregate.”

The laws to be introduced on Tuesday are twofold. One measure will prevent dividends from capital raisings being frankable, which would save around $10m a year. The larger measure applies to franking credits attached to off-market share buybacks, which will be aligned under the new laws to be treated the same as on-market buybacks, which will save the budget $550m over the forward estimates.

Dr Chalmers said the new laws were designed to put “integrity” back into the income tax system.

On Monday, Dr Chalmers was forced to reveal Treasury modelling that showed 10 per cent of super balances would be affected by the hike in concessional tax rate from 15 per cent to 30 per cent on balances of more than $3m.

The government has sold the policy as a “modest” measure that would only affect 80,000 super balances in today’s terms.

The Coalition argues franking credit changes were so broadbased they would stop companies using franking credits, which would in turn strangle an important source of income for many retirees.