Plato Investment Management Limited has warned that Labor’s proposed changes to the dividend imputation system may impact more superannuation funds and retirees than anticipated.
Data from the ATO and an analysis from APRA backs up Plato research that suggests many APRA-regulated funds were also likely to be affected, including some industry and retail super funds.
Plato managing director Dr Don Hamson says that the proposal is honourable in its intent to cut costs and discourage abuse of the system, but it may impact a broader range of stakeholders.
“The ALP proposal will clearly impact many pension phase SMSFs, but Plato research suggests it has the potential to impact many other superannuation funds,” said Dr Hanson.
Dr Hamson said that most super funds with a large percentage of pension phase investors may currently receive a net refund of franking credits and they would be affected.
“The likelihood and size of franking credit refunds is also related to the amount of franking generated (higher), the level of taxable income (lower) and the level of contributions tax paid by accumulation members (lower),” he said.
A higher percentage of super funds could now miss out on franking credits if returns are low and taxable income is reduced said Dr Hamson.
“As the superannuation industry matures, and more members move to pension mode, we believe this proposal may represent a ticking time bomb for the whole superannuation industry,” he said.
Plato did believe that the policy required amendments and Dr Hamson said there is perhaps other ways to fix the policy.
“Perhaps a better way to eliminate the few extremely large franking credits refunds would be either to limit the total amount people can invest into super, or limit the maximum franking credit refund per person,” he said.
