ELECTION: Locals stand to lose on franking credits
IF PROPOSED changes to franking credits are pursued, Vee Pidgeon worries she will lose a significant portion of her income.
The Hervey Bay woman spoke to the Chronicle about her fears of the changes flagged by Labor should it make government.
Under the party's plan, shareholders will still be able to reduce tax with franking credits but cash refunds for excess credits will be stopped.
But the Coalition claims this plan will adversely affect retirees and could result in taxpayers with shares losing up to $20,000 in refunds.
Mrs Pidgeon, who receives franking credits, said she and her husband relied on the money from dividend imputations as part of their yearly income.
"We're not self-funded retirees, but they will really be the losers," Mrs Pidgeon said.
"Because they really do really heavily rely on that money."
She said the system needed to be left as it was.
Changes to franking credits are part of the major areas of tax reform being targeted by Labor to create $154 billion in revenue over the next decade.
Other areas that will fund this revenue include negative gearing and capital gains tax, trusts, multinationals and accountant deductions and superannuation concessions.
Prime Minister Scott Morrison has attacked the changes to franking credits as putting an additional tax burden on the economy.
How do franking credits work?
The Chronicle spoke to Hervey Bay financial planner Shane Bradbury for a breakdown on franking credits and what any proposed changes would mean for retirees in the Fraser Coast region.
Mr Bradbury explained when companies returned their dividend, or part of the profits back to investors, that dividend they received came with a credit of tax being paid by the company on a portion of income.
But under changes proposed by Labor, the franking credit from the dividend would no longer be provided.
"I've got a number of clients that lodge a dividend claim every year," Mr Bradbury said.
"It puts some money back in their pockets and the changes will rip it away.
"The standard pension is not a great deal so any money you take out when you've got high electricity and rent costs makes a huge difference to the person's budget."
Mr Bradbury said the preferred policy would be to leave it alone and instead crack down on multinational companies "that pay little or no tax".