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09/05/16
09:29
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Originally posted by pear
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Hi Baxter
Class warfare? I had ignored your last political post as it was just dribble. My post was purely on superannuation.
You are quite correct, imputation was introduced by Keating. But if you look at the history, it shows that what Keating introduced was that franking credits could only bring your tax payable to zero. Franking credits were not returned in cash. This was changed by the Howard/Costello government.
I am fully aware on how franking credits work. And the figures I quoted are correct. What I question is that you say that the government owes you these franking credits. I thought the idea behind imputation was that tax should be paid on company profit at 30% by the company. The distributed profit should not be taxed again.
So if a company owned by a superfund makes a 100 profit, it pays $30 tax. It distributes the net profit of $70 (with a $30 franking credit attached). What is the math? If the fund is in pension mode it get a refund of the full franking credit of $30. If in accumulation mode, the taxable income is $100. tax on $100 is $15, less the franking credit of $30, it get a refund of $15. So how much tax is paid on the original company tax of $100? Either zero or $15. So where is this "entitlement" to a franking credit coming from except that it is law?
I am pointing out the law in this case is absurd, and the changes they have introduced does not make super any less attractive a place to park your money.
A "class" of investment has nothing to do with class warfare as you suggest. I was merely pointing out that if you earn "exempt income" (pension mode) the law disallows you from claiming anything in relation to earning this income. You do not even get back foreign tax you have paid. Yet they allow the return of franking credits.
Think about that.YOU DO NOT GET TAX YOU have paid back. Hence, it favours a class of investment over another.
Pear
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I see your point..but the franking credit is attached to the dividend as a total payment...so the franking credit is creditted to any of your accounts...thats how it works....