A SuperConcepts survey has found SMSF trustees would change their investment patterns if Labor’s proposal to remove refundable franking credits were to pass, with many saying they would shift their money from Australian shares to foreign markets.
More than 72 per cent of respondents said they would change their investment strategy to compensate for the loss of franking credit income.
Around 66.8 per cent of trustees viewed the proposal as something that will impact them a great deal.
The study was sent out to 4,001 trustees, out of which 632 responded.
“The survey establishes first-hand from SMSF trustees what impact the proposed change by Labor would have on their SMSF strategy and investment choice,” said Natasha Fenech, SuperConcepts CEO.
“International shares were the most popular alternative investment with 61.6 per cent of respondents saying that their share portfolio will shift to foreign markets.
“This is a big concern for the Australian Stock Exchange, a big concern for local companies contemplating the cost of capital from overseas sources, and a big concern for the future ownership of local firms if it’s no longer viable for locals to invest.”
ATO figures showed there were 597,000 SMSFs in Australia holding $697 billion in assets, with more than 1.1 million members, as of 30 June 2017.
Around 25–27 per cent of respondents in the survey said they would be interested in managed funds, term deposits, fixed interest and property as an alternative investment.
SuperConcepts said closing an SMSF was also a fair consideration among trustees if the policy proposal succeeds.
“It is concerning that 14.5 per cent of respondents are thinking of closing their SMSF as a result of this policy which doesn’t apply tax policy consistently to individuals across different superannuation structures, while 1.4 per cent thought that they might withdraw their super and go to an aged pension,” Ms Fenech said.
“SMSFs play a critical role in the super sector to provide choice and competition against industry and retail funds, and it’s clear that everyone benefits from the competition as it keeps fees in check when consumers have adequate choice in the market.
Only 3 per cent were unsure of what action they would take, but mostly viewed the proposal as something that would impact them negatively.
About 20.3 per cent expecting a significant impact and another 8.9 per cent said it would be moderate. Only around 4 per cent of respondents believed the proposal would have little or no effect on their SMSF.
“Without a doubt this is one of the most pressing election issues facing SMSFs in pension phase and the choices being forced on them are not what they want,” Ms Fenech said.
It will drive capital away from Australian companies and therefore doesn’t allow for Australians to support brands remaining locally owned.”
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