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Maintain the current dividend imputation system

Discussion in 'Business, Investment and Economics' started by willy1111, Oct 5, 2018.

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  1. willy1111

    willy1111

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    The income being drawn from Super could be capital - from non-concessional contributions paid in that have already been taxed at marginal rates - from concessional contributions which have been taxed at 15% on the way in (a discount to incentivise saving for retirement via this structure, although they don't let one put much in these days) and the earnings on these funds have already been taxed at 15%.

    If one has saved $10M into a bank account and decides to draw out $200K a year from their own capital - should that be taxed? No, only the earnings on the $10M are taxed as it should be.

    I agree that the 0% tax on income of the fund in pension phase is very generous - but maybe that it is the reward for putting funds away to fund your own retirement rather than spending it on the high life whilst young and going on the aged pension.
     
  2. willy1111

    willy1111

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    I think it is absolute robbery to tax super pensions considering tax has already been paid and a lot of it is return of capital - only the earnings of the fund should be taxed.

    Maybe the earnings of the fund over $100K - which is pretty much the case with the $1.6M cap on Pension accounts - $1.6M in shares paying 5% dividend yield is about $80K per year, 6% yield is $96K - anything over $1.6M has to be in accumulation where the earnings are taxed at a flat 15%.
     
  3. willy1111

    willy1111

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    With that argument, is it considered what every other Country's Company tax rate is and what tax is applied to dividends paid to the shareholder?
     
  4. SirRumpole

    SirRumpole

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    Yes, I agree with that. How are earning and capital returns distinguished in the hands of the payee ?
     
  5. SirRumpole

    SirRumpole

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    Some would pay more than us and others less. There are a lot of countries out there.
     
  6. willy1111

    willy1111

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    It is the Super funds and SMSFs that pay the tax on the earnings/capital gains of the fund for each tax year. So it doesn't need to be distinguished in the hands of the payee as it has already been distinguished and taxed at the fund level.

    If ones fund has $1M invested in cash earning 2% a year - the funds taxable income would be say $20K - it is taxed at fund level - either 0% if in pension phase or $3K if in accumulation phase. If the member wished to draw a pension of $200K a year they could - but they would probably run out of money in a bit over 5yrs - if they wanted to draw out $100K they could but would run out of money in a bit over 10 years - if they wanted to draw out $50K a year - it would last them more like 20 years.

    As such it doesn't need to be distinguished in the hands of the payee/member - just at fund level as is done now.
     
  7. Toyota Lexcen

    Toyota Lexcen

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    the work income will all get added up with the dividend income, if any tax owed it can be offset

    so once income (work, dividend etc) exceeds 20k the franking credits will have an impact

    my family member now a lib voter, whether Lib win who knows.
     
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  8. sptrawler

    sptrawler

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    Contributions are taxed at 15 % and earnings are taxed at 15 %, that is all the earnings there is no $18k tax free threshold.

    I agree 100% on taxing super pensions above $100k, that is what the public servants get taxed on their unfunded, indexed, tax payer supported pensions, also that is what Labor took to the last election.
    What pisses me is they are screwing over the little man, or they would have stayed with the $100k plan, but they have changed because of the $1.6m cap.
    They said the franking credit plan would save $52billion dollars over 4 years, how the hell can that be true, when they say there are only a low number people that it will effect.
    No wonder our school children are struggling, when silly Billy comes up with stupid figures like that, bloody goose.
     
  9. Garpal Gumnut

    Garpal Gumnut

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    IMO one needs 6-8% to fund a decent living.

    Interest rates are so low it is better to stay in cash and pop in and out of the market on corrections or with a dividend tactical position.
     
  10. Smurf1976

    Smurf1976

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    My concern isn’t so much about super but those who invest outside super with the intention of retiring sometime prior to being able to access their super and with no intention of ever claiming any form of welfare.

    The message from Labor seems to be that one should structure their finances such that retiring and claiming the pension, with perhaps a few years on the dole (with zero intention of finding employment) prior to that for those not wishing to work until they’re stuffed, is the way to go.

    That’s the exact opposite of the “provide for yourself, don’t rely on the pension” message I’ve been hearing for the past 25+ years.

    The whole issue of investing and retirement in Australia needs the politics removed in my view. I can’t imagine there are too many blue collar workers with any intention of working until they’re 70 and a lot of white collar workers won’t be doing so either.

    The way it’s going, we’re going to end up with an awful lot of 60-somethings on the dole.
     
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  11. SirRumpole

    SirRumpole

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    Idea good, but practically speaking, with wages stagnant, cost of living rising, housing still expensive and more people being confined to the "gig economy", how many people have the extra cash to invest, especially if they are trying to raise a family of future taxpayers ?

    And if the economy turns downward and they lose their money on the share market, who is going to pick up the tab ?
     
  12. sptrawler

    sptrawler

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    They really shouldn't be allowed to change the rules the way they do, it makes it impossible to plan for your retirement through super, yet that is what it was supposed to do.
    All it is doing is stressing the hell out of older workers.
    It is actually a national disgrace, someone should take Billy to task and get him to substantiate his savings claim.
     
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  13. sptrawler

    sptrawler

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    The same people who pick up the tab, for those who have never worked or never saved.
     
  14. Smurf1976

    Smurf1976

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    My assumption is that members of this forum would, considering the forum’s primary focus, either have funds to invest now or expect to do so in the foreseeable future.

    If someone has no money to invest then I doubt they’d be attracted to spend time on a share market forum. That’s my assumption anyway.
     
  15. SirRumpole

    SirRumpole

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    I'm sure you are correct, I'm not sure that this forum represents a cross section of society and that's what political decisions are made on.
     
  16. Smurf1976

    Smurf1976

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    I don’t see myself as anything special but I’ve never been afraid of working.

    12 hour days, pretty much every day - yep, been there and done that one. Did it for a few years actually.

    Weekends, public holidays, middle of the night etc - yep, done that too.

    I’ve always chosen to live below my means whether my income was half the average or double the average (and I’ve been in both situations).

    Now we have proposals to punish those who have sought to avoid relying on welfare and that’s just wrong in my view.

    I’m strongly in favour of there being a welfare safety net for those who, for whatever reason, find themselves needing it but I sure don’t like Labor’s message that everyone is either working, on welfare or is rich.

    What about those with modest investments who need neither employment nor welfare but whom couldn’t be described as rich using any sensible definition?
     
  17. HelloAgain

    HelloAgain

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    Labor doesn’t believe in self sufficiency and needs people to rely on welfare.
     
  18. SirRumpole

    SirRumpole

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    It's all a matter of numbers. If the people you describe are small in number then they are likely to be ignored by both parties.

    Personally I think the way to go is widen the tax net and reduce the rates. The top rate should be no more than 40% imo but to do that you would need to cut down on some of the other perks people in that range use to reduce tax. Those who don't use those perks will be much better off, those who flog the system for all its worth will be worse off and those with a modest involvement may come out better off or about the same.

    That gives the incentive to work and do what you want with your money.
     
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  19. Toyota Lexcen

    Toyota Lexcen

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    Try getting welfare (dole) when you have any sort of cash, shares, dividends, income etc.

    They have tables for how many weeks you will have to sit out. Yet the person next to you will get it straight up.
     
  20. willy1111

    willy1111

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    I agree, but when pushed on it I think there response was that it was treasury or a parliamentary committee that did costings not Labour...still didn't provide the maths just try to justify it by saying some independent group did the costings.

    I think it was $50 odd billion over 10 yrs it is supposed to save.

    I'm all for maintaining the current system, I think companies are just ownership structures and the profits should ultimately be taxed in the hands of the owners at their marginal rate when the dividend is paid to them.

    The only reason company tax exists is so that the government get a clip in the year the profit is made, it is almost like a prepayment in the same way wages tax is witheld from employees and the ledger balanced when the individual tax return is lodged.
     
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