The refund of surplus franking credits is emerging as one of the big issues arising from the Ralph reforms, according to a recent AM Corporation survey.
The refund of surplus franking credits is emerging as one of the big issues arising from the Ralph reforms, according to a recent AM Corporation survey.
AM adviser technical services manager Phil La Greca says that when tax is paid on a franked dividend and claimed back and the marginal tax rate of the shareholder is less than the corporate rate of the company involved, there will be a tax franking credit loss.
“Under Ralph, the tax office will send back the difference but for self funded retir-ees the issue is how to increase this yield or take advantage of capital gains tax (CGT) changes with equities,” La Greca says.
“The most interest to clients will be whether to be invested in the market or stick their funds in the bank.”
The survey also found a clear majority regarded the changes as good for their busi-ness and also for their clients with nearly 80 per cent of respondents confident about the tax reforms.
At the same time advisers were varied in their assessment of the impact of the re-forms on tax structures as a result of the new 30 per cent tax rate for companies, trusts and many individuals.
Respondents were split into roughly three equal groups regarding the use of tax structures with a majority split over whether they would still be used for income or non income tax reasons.
The remaining third believed there would be a shift to people investing in their own names, but La Greca says the task facing planners is to help clients find the most effective investment vehicle in terms of taxation.
“The issue for the client is ‘why, apart from tax, am I using this structure,’ and any planner setting up or unwinding investments should ask their clients to address this issue,” La Greca says.
