Clients of financial advisers will be better placed than most to deal with the consequences of a Labor Government removing refundable franking credits, according to the Association of Financial Advisers (AFA).
In a submission filed with the House of Representatives Economics inquiry into the policy proposal, the AFA said advice clients would have access to the advice necessary to understand what the impact is and what they should do to avoid it.
However, it said the biggest impact and the one that would be most counter-productive would be “the encouragement for Australians to avoid saving too much so that they would lose eligibility for the Age Pension”.
It said that someone on an Age Pension could easily be much better off than someone who had saved hard for their retirement and did not qualify for the Age Pension.
The AFA submission also warned that there would be an overall reduction in investment in Australian shares which would most likely have a flow-on consequence for the share prices of Australian companies and future investment in Australian companies and the Australian economy.
It said this was likely to have a negative impact on future growth in gross domestic product and the Federal Budget.
“The greatest impact of these changes will be on the older Australians who are less able to understand the impact of the changes or to respond to these changes,” the submission said. “Financial stress is a very big issue in Australia and this is accentuated for older people who have much less capacity to deal with complexity and stress.”