Contradicting the Labor Party line that it’s the upper end of investors who benefit most from franking credit refunds, the Financial Services Council (FSC) has found that ordinary Australians who are members of large super funds are the biggest group of beneficiaries, advantaging up to 2.6 million members.
In a submission to the House of Representatives Economics Committee, the FSC wrote that while the refunds provided a smaller average benefit for members of large funds as opposed to self-managed superannuation funds (SMSFs), over a lifetime their worth could still add up to $55,000 by retirement.
The FSC surveyed fourteen retail super funds, finding that for low balance accounts with under $100,000, dividend repayments increased returns to members on average by 0.26 per cent annually. The refunds also benefited those in retirement, with members in that phase who received them getting an average of $850 from the repayments per year.
Small Australian Prudential Regulation Authority regulated funds received many thousands of dollars annually from dividend refunds, increasing average returns by up to 4.2 per cent.
FSC chief executive, Sally Loane, said that the FSC supported the continuation of franking credit refunds as they provided substantial support for Australians’ retirement savings. She called for a “moratorium on adverse changes” such as this to the super system.