Question: We have invested for income in our SMSF. Under Labor’s plan to abolish tax credits for franked share dividends we potentially will lose some $22,500 income per annum. Could this problem be overcome if the banks, Telstra, BHP, Rio and other companies currently paying fully franked dividends move to low or nil franking and boost dividends? Then our income will not change, as our higher dividends are tax free in our pension accounts.
Answer (By Paul Rickard): No, not unless the system was radically changed.
Imputation credits are of no value to the company. They are only of value in the hands of the shareholders. The credits represent the tax the company has already paid, and effectively act like a tax rebate in your hands.
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