And with one fell swoop, Bill Shorten introduced bold plans to hit shareholders by cancelling cash refunds for those who claim tax credits on dividends. Of course it’s all in response to Trump’s shake up to the US tax system. It’s another Robin Hood style rob the rich and give to the poor scheme that aims to cut off tax refunds that have been enjoyed by shareholders introduced by Paul Keating in the 90’s and modified by the Howard Government. It’s estimated to reap a staggering $59bn in revenue over the next ten years. The impact will have far reaching consequences that will affect not just the wealthy but any retiree, SMSF or pension fund reliant on tax refunds. What are the dividend imputation rules? In Australia dividend imputation is a tax system in which some or all of the tax paid by a company may be rebated or imputed back to shareholders by way of a tax credit to reduce the income tax payable on a distribution. When a company distributes its profit to shareholders via a dividend, it has already paid tax on this profit. Paul Keating introduced dividend imputation system to eliminate double taxation of company profits, once at the corporate level and again on the dividend to shareholders. That means a company can pass on credits for the tax or otherwise called franking. The franking credits are attached to the distribution and can be used by the shareholder as a tax offset. The Howard government enhanced the scheme by allowing individuals and super funds to claim cash refunds for any excess imputation credits not used to offset their tax liabilities. It is this that Labor wants to get rid of because its costs too. In other words retain imputation credit to reduce tax liabilities, but cancel cash refunds. The group that are…

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