Save
Controversial tax proposal in spotlight as dividend returns spike in 2018
Save
Controversial tax proposal in spotlight as dividend returns spike in 2018
Total dividends across the Australian market increased significantly last year, as the fast-approaching federal election brings Labor’s proposed axing of refundable franking credits into the spotlight.
Controversial tax proposal in spotlight as dividend returns spike in 2018
Total dividends across the Australian market increased significantly last year, as the fast-approaching federal election brings Labor’s proposed axing of refundable franking credits into the spotlight.
Market-wide dividends rose by almost 8 per cent in dollar terms last year, according to one investment management firm, with large share buybacks by major market forces such as BHP and Rio Tinto spurring positive returns.
“The almost 8 per cent increase in market-wide dividends was particularly encouraging given the traditional income stocks – the big four banks and Telstra – broadly maintained, or in Telstra’s case cut, their dividends in 2018,” Dr Don Hamson, managing director of Plato Investment Management, said.
“2018 has clearly been a very strong year for equity income generation – and this will continue into this year.”
He said such figures were particularly timely, given that a Labor-led government would move to scrap franking credit refunds following the upcoming federal election.
“To that end, we would encourage companies with excess franking account balances to consider increasing franked dividends or undertaking tax-effective buybacks before the end of this financial year,” Dr Hamson asserted.
Leading up to the May election, Dr Hamson recommended dividend income investors, particularly retirees and those with self-managed super funds, broaden their investment from Telstra and the big four banks to achieve maximum capital growth.
“Investors should be wary of this concentration as there are many other good companies that offer both consistent dividend income and better potential for capital growth in Australia and globally,” he said.
However, Dr Hamson did remain skeptical that an ALP-led government would be able to push the necessary legislation to remove franking credit refunds through the senate, a move he said would “likely prove difficult”.
The battle over franking credit refunds
His words come as the House of Representatives standing committee on economics is currently holding public hearings across Australia for its inquiry into the implications of removing refundable franking credits.
The inquiry is looking into how the changes would likely affect investors, particularly retirees and self-managed super fund members, after experts and lobbyists suggested Labor’s claim that the policy will only impact the wealthy was flawed.
Expected behavioural changes by investors should the changes be implemented, including an increased dependence on the pension, will likely also be looked at by the inquiry, as well as if there are carve-outs applied and what this would mean for additional complexity to the system.
Researchers, financial professionals and industry bodies alike have questioned Labor’s proposed policy since its announcement, with many seeking to highlight the significant impact the incorporation of franking credit dividends has on the retirement savings of more than 1 million Australians, many with modest incomes.
Tax saving
Why fast-tracking tax cuts won’t stimulate the economy
Treasurer Josh Frydenberg has flagged that previously legislated tax cuts could be moved forward in a bid to help stimulate the Australian economy. ...Read more
Tax saving
Last-minute items to check off before 30 June
With the end of the financial year almost here, an accounting firm has outlined key changes with tax returns this year and flagged some last-minute tax strategies to consider before 30 June. ...Read more
Tax saving
Australia’s richest owe the Tax Office $772m
Australia’s elites and private companies fell $772 million in taxes due to miscalculations and deliberate tax avoidance, the Australian Taxation Office has revealed. ...Read more
Tax saving
Do you have to pay taxes on a trust?
Trusts are usually set up for business, estate planning and investment purposes to separate the legal and beneficial ownership of assets held within the structure. ...Read more
Tax saving
Government rebuffs regional allowance and tax concession reform
A review’s findings into the viability of area tax concessions and payments for regional and remote Australians has had its recommendations shut down by the same government who requested the report...Read more
Tax saving
Penalties for tax fraud in Australia
Public taxes are used to fund government projects in relation to health, defence, infrastructure and many other national and local projects that require public funding. ...Read more
Tax saving
Disaster relief payments receive tax-exempt status
The Australian government has made disaster relief payments to bushfire-affected individuals and businesses tax-exempt while extending tax-free financial support to NSW Rural Fire Service volunteers. ...Read more
Tax saving
Are your franking credits working?
Here’s what you need to know about franking credits and how they work. ...Read more
Tax saving
Why fast-tracking tax cuts won’t stimulate the economy
Treasurer Josh Frydenberg has flagged that previously legislated tax cuts could be moved forward in a bid to help stimulate the Australian economy. ...Read more
Tax saving
Last-minute items to check off before 30 June
With the end of the financial year almost here, an accounting firm has outlined key changes with tax returns this year and flagged some last-minute tax strategies to consider before 30 June. ...Read more
Tax saving
Australia’s richest owe the Tax Office $772m
Australia’s elites and private companies fell $772 million in taxes due to miscalculations and deliberate tax avoidance, the Australian Taxation Office has revealed. ...Read more
Tax saving
Do you have to pay taxes on a trust?
Trusts are usually set up for business, estate planning and investment purposes to separate the legal and beneficial ownership of assets held within the structure. ...Read more
Tax saving
Government rebuffs regional allowance and tax concession reform
A review’s findings into the viability of area tax concessions and payments for regional and remote Australians has had its recommendations shut down by the same government who requested the report...Read more
Tax saving
Penalties for tax fraud in Australia
Public taxes are used to fund government projects in relation to health, defence, infrastructure and many other national and local projects that require public funding. ...Read more
Tax saving
Disaster relief payments receive tax-exempt status
The Australian government has made disaster relief payments to bushfire-affected individuals and businesses tax-exempt while extending tax-free financial support to NSW Rural Fire Service volunteers. ...Read more
Tax saving
Are your franking credits working?
Here’s what you need to know about franking credits and how they work. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
