Warning for SMSFs: corporate tax rate cut will hit super

The government may discreetly target superannuation by cutting the corporate tax rate in order to reduce franking credits and generate billions in revenue, according to one Australian fund manager.

 

Head of Clime Asset Management Michael Kloeckner said the most “well-hidden way in which the government can hit super” is by reducing the corporate tax rate from 30 to 25 per cent.

This would mean the calculation of franking credits will also be reduced from 30 per cent to 25 per cent, he said, which would reduce yields for super fund members in pension mode.

“The government wouldn’t have to say anything about the loss of franking credits [to the public] because they’re just reducing the corporate tax rate,” said Mr Kloeckner.

If the government does propose a cut to the corporate tax rate, it is likely it would reduce tax to 25 per cent for small businesses, while large businesses with a turnover of around $100 million would pay a 5 per cent levy in place of the reduction in the tax.

“That way the company still keeps paying 30 per cent but the super fund holder is down to 25 per cent,” he explained.

The government would then likely retain the 5 per cent levy from these larger companies for revenue, he said.

“So then you’re actually benefiting the small guys, which is what Malcolm Turnbull would be happy to do, and [with] the big guys you say, you’re big and you can afford to pay tax,” he said

“But in the meantime the amount in franking the [government will] save from super is going to be in the billions.”

 

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