Frankly, it's the wrong direction with caps and grandfathering
People calling for Labor's franking credits policy to be modified by either a grandfathering of the effective date or a cap on the amount misunderstand the structure of SMSFs. Someone needs to tell Albo and the Shadow Treasurer that neither suggestion will work.
For example, two days after the election, on 20 May, the AFR wrote:
"Surely some sort of compromise position – a cap of say $15,000 on franking credit refunds – would have defused the issue in such a way that showed Labor wasn’t being harsh or unfair, but also allowed it to keep some of the budget savings."
The SMSF, not the member, is the taxpayer. The cap would need to be on the SMSF, and anyone could manage the cap by opening multiple SMSFs. Also, an SMSF can have many members, making the impact on an individual different depending on the number of members. Grandfathering is also flawed because a fund can change members. Trustees can enter (or leave) a fund when they wish, allowing new members to benefit from the grandfathering. Any revised proposal must address the inequity between SMSFs and APRA funds of the previous policy.
Which brings us to Treasurer Josh Frydenberg's support for the Productivity Commission's proposal to review the retirement incomes system. This is a big deal. The Commission made 31 recommendations, including the 'Best in Show' super fund shortlist. Although during the election campaign, Scott Morrison ruled out changing taxes on superannuation, the opening of a formal review puts everything back on the table - pension rules, the role of the family home in the assets test, taper rates, industry fund governance, fees. Forget keeping superannuation policy out of the headlines
