Question: Are our franking credits safer, seeing they seem to have shelved the paid parental leave scheme? A more direct tax on money taken out of super seems inevitable or on profit, regardless of whether in pension mode or not. Or am I tilting at windmills?
Answer (By Paul Rickard): There has been no update about this. While further changes are expected to the paid parental leave scheme, the current plan would see larger companies pay a levy of 1.5% to fund this commencing 1 July 2015.
At the same time, the company tax rate would be reduced to 28.5% – meaning that larger companies would continue to pay tax at an effective rate of 30%, but only be able to frank their dividends at a rate of 28.5%.
My guess is that we will get an update on the paid parental leave scheme in February – and alongside this, any flow on impacts it has for investors.
Question 2: The ATO seems to want to take a dim view of trustees who ‘trade’ shares within the SMSF format. This I believe is because of the tax advantaged situation, especially in pension format. What constitutes a ‘share trading’ situation? I believe they recognise a trustees right to review investments for peak performance but the ‘share trading’ issue seems to be gaining strength! What are your thoughts?
Answer 2 (By Tony Negline): Super funds are specifically banned from being a ‘share trader’ for tax purposes. As pension funds don’t pay tax, this is not really relevant in pension stage.
Whatever you buy and sell in your super fund, you should make sure that your trust deed and investment strategy are consistent and that you keep all relevant transaction records, including trustee minutes.
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