Where to now for long term investors of Telstra, page-6177

Fed, I'll try to explain it so even you can understand. Companies pay tax on profits on behalf of the company's owners, ie the shareholders. If your circumstances are such that you do not pay tax, the shareholder is entitled to receive that tax in the form of a franking credit from the ATO. If you do pay tax, then the franking credit rebate reduces the tax you would ordinarily pay.

Now many people have worked all their lives and saved their money in self managed super funds, so that they can support themselves in retirement and not be dependent on a government pension. Many have done this through a self managed super fund. In doing so they organised their affairs under rules whereby no tax is payable on the earnings of their fund with a balance under $1.6m when they are retired, over 60, and receiving a pension from their fund. If you have more than $1.6m in your fund you are taxed. Most people have far less than $1.6m. These rules were implemented to encourage people to save for their retirement and lessen the burden on government and taxpayers.

Given the low interest rates available at present, most retirees in SMSF's are heavily invested in dividend paying shares where they expect to receive the franking credit. In effect Shorten if elected will remove the entitlement retirees have to the franking credit, thereby reducing their income by 30%. This will result in many self funded retirees reorganising their affairs so as to receive a government pension. In addition it could be argued that the value of dividend paying shares such as Telstra will be impacted as funds are removed from this form of investment.

Shorten's proposal has singled out one section of the community, ie people who have funded their own retirement, and have their money in self managed super funds. It has been said that this will effect about one million people in self managed super funds. It will force many onto a government pension, and will not in my opinion recoup anywhere near the amount of tax that Shorten is claiming. It is grossly unfair to one section of the community who have organised their affairs under certain rules, only to have these rules changed after they have retired.