Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Thursday, 4 April 2019
Page: 14931

Dividend Imputation

Dear Mrs Wicks

Thank you for your correspondence of 18 February 2019, originally directed to the Treasurer, regarding petition number EN0770. As this matter falls within my portfolio responsibilities, your correspondence has been referred to me for response.

The Government has publicly stated it does not support Labor's policy to deny refundability of franking credits, as the then Treasurer noted in his press release of 13 March 2018.

Refundability of franking credits has been provided since 2001. When a company pays a dividend to its shareholders, it has the option of also providing a franking credit that recognises the tax the company has already paid on its income.

The franking credits can then be used by the shareholders to offset their tax obligation. Where a shareholder's offset is higher than their tax bill they receive a tax refund from the Australian Tax Office. Retirees and other low income earners are taxed at a lower rate than the 30 per cent rate paid by companies, so are often able to get a refund, as are entities like charities that are income tax exempt.

When introduced by the Howard Government in 2001 as part of the A New Tax System package, the original justification for introducing refundability into the imputation system was that it would ensure that the shareholder is taxed at their marginal rate as if they had derived the underlying profits themselves.

In the Australian superannuation system, superannuation contributions are generally taxed at 15 per cent and investment earnings at 15 per cent prior to the preservation age. This concessional tax treatment provides an incentive for older Australians to remain in the workforce until they reach the preservation age if they wish to do so and to add to savings for their retirement. Superannuation benefits paid, either as an income stream or as a lump sum, from a taxed source (that is, one in which taxes have been paid in the fund on contributions and earnings), are tax free for people aged 60 and over.

1 trust this information is of assistance to you.

Yours sincerely

from the Assistant Treasurer, Mr Robert(Petition No. EN0770)