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Implications of removing refundable franking credits 

On request from the Treasurer, the House of Representatives Standing Committee on Economics will hold an inquiry into the implications of removing refundable franking credits. As a result of making the franking tax offset non-refundable, a resident individual or super fund taxpayer would only be able to use the franking credits to offset their tax liability, with no cash refund for any excess credits....
The 'Terms of Reference' for the inquiry are for the committee to inquire into, and report on, the use of refundable franking credits, their benefits and the implications of their removal, including:
· analysis of who receives refundable franking credits;
· the opportunities it provides to offer alternative savings and investment vehicles to low and middle income earners;
· the impact it has on lowering tax bills;
· consideration of how refundable franking credits support tax principles, particularly implications for tax neutrality, removal of double taxation and fairness;
· if refundable franking credits are removed, who it would impact and how; and
· the implications from expected behavioural change by investors, including for:
– increased dependence on the
– stress and complexity it will
cause for Australians, including older Australians to adjust their investments;
– if there are carve outs applied,
what this might mean for additional complexity, uncertainty and fairness;
– reduced incentives to save and
distortions to which asset classes are invested in and funds are used; and
– the reliability of providing a
sustainable revenue base over the longer term. Editor: The proposal to remove refundable franking credits was first announced by Labor in March 2018 and is estimated to impact about 1.2 million individual taxpayers and about 200,000 SMSFs (which is approximately a third of all SMSFs). Charities and other not-for-for profit organisations such as universities will be exempt under the proposal. The changes were proposed to apply from 1 July 2019.
Ref: Parliamentary Media release, 19 September 2018

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