Abolishing dividend imputation will reduce the annual income of the average retiree by $4,000, says the Association of Superannuation Funds of Australia (ASFA).
According to research by the ASFA, retirees and their super savings will be hit hardest by changes to dividend imputation.
ASFA chief executive Pauline Vamos said: “Currently, dividend imputation over both the accumulation and retirement stages leads to an approximate 13 per cent increase in retirement income streams.
“Removing or changing dividend imputation may seem like a quick revenue fix for the government now, but it will have negative long-term effects on Australians' retirement savings.
"Initiatives like franking credits help to incentivise Australians to put money away for retirement as early and as often as possible.
“If we remove this benefit, it will have the most negative impact on retirees and low- to middle-income Australians who will see the tax rates on their superannuation earnings raised from 0 and 15 per cent respectively to 30 per cent across the board," Ms Vamos said.
ASFA pointed out that a decrease in retirement income streams will impact Australian taxpayers, namely through financing increased public pension entitlement.
The report also noted that removing dividend imputation will make domestic equities less attractive.
"It is imperative that we take a long-term view when considering tax reform and adequately cater for our growing retiree population," said Ms Vamos.
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