Superannuation Discussion + market volatility

[JohnK]

And someone must therefore win.

Of course someone wins. But many also lose. There'll come a time when people won't want to buy at the higher share prices and then we'll be in trouble.

 

[Pushka]

Of course someone wins. But many also lose. There'll come a time when people won't want to buy at the higher share prices and then we'll be in trouble.

No. The price stays the same.

 

[QF WP]

From Don Hamson of Plato fame, a specialist Australian share fund manager who invests in a rotational basis into shares that only pay franked dividends:

Plato will adapt their strategy if the (Labour removal of franking credits) policy does change to include more active dividend rotation as no 45 day rule would apply anymore. A lot of water to pass under the bridge before this comes into place – ie ALP winning election, need to get Senate and cross bench approval (who have said they won’t approve in current format).

Also there will be an influx of companies looking to flush out franking credits via buy-backs or special dividends in the period before a potential removal of franking. [QF WP - that's a possible reason to stay in these shares to participate in those offers.]

 

[Pushka]

From Don Hamson of Plato fame, a specialist Australian share fund manager who invests in a rotational basis into shares that only pay franked dividends:

Plato will adapt their strategy if the (Labour removal of franking credits) policy does change to include more active dividend rotation as no 45 day rule would apply anymore. A lot of water to pass under the bridge before this comes into place – ie ALP winning election, need to get senate and cross bench approval (who have said they won’t approve in current format).

Also there will be an influx of companies looking to flush out franking credits via buy-backs or special dividends in the period before a potential removal of franking. [QF WP - that's a possible reason to stay in these shares to participate in those offers.]

View attachment 144451

And I’m so glad I’m leaving all this to the experts now.

 

[JohnK]

No. The price stays the same.

Share markets are pyramid schemes. Property has also been heading that way. There are interesting times ahead.

 

[get me outta here]

Interesting article from Morningstar this morning, 1st para reproduced below: Franking changes won’t deter stock investors:

Franking changes won’t deter stock investors - Morningstar.com.au


Franking changes won’t deter stock investors
Nicki Bourlioufas | 19 Nov 2018Text size

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Page 1 of 1

Various experts believe Australian dividend stocks will remain popular if a Labor government is elected and follows through on its proposed changes to dividend imputation credits.

Morningstar's head of equity research and practitioners within financial planning and funds management – for both equity and fixed income funds – hold this view, even as uncertainty prevails regarding other potential flow-on effects.

The Labor Party has said it will abolish cash refunds for surplus franking credits from 1 July 2019 if it wins government. Under this policy, franking credits would still be claimable as a tax deduction on income, but surplus credits won’t be refunded.

Some pensioners will be exempt from the rule. Individuals and funds currently receive a refund of franking credits if the franking credits they receive on dividends exceed their total tax payable. Those not paying tax, including superannuation funds where members are in pension mode, would be the most advantaged.

 

[Pushka]

Interesting article from Morningstar this morning, 1st para reproduced below: Franking changes won’t deter stock investors:

Franking changes won’t deter stock investors - Morningstar.com.au


Franking changes won’t deter stock investors
Nicki Bourlioufas | 19 Nov 2018Text size

|

Page 1 of 1

Various experts believe Australian dividend stocks will remain popular if a Labor government is elected and follows through on its proposed changes to dividend imputation credits.

Morningstar's head of equity research and practitioners within financial planning and funds management – for both equity and fixed income funds – hold this view, even as uncertainty prevails regarding other potential flow-on effects.

The Labor Party has said it will abolish cash refunds for surplus franking credits from 1 July 2019 if it wins government. Under this policy, franking credits would still be claimable as a tax deduction on income, but surplus credits won’t be refunded.

Some pensioners will be exempt from the rule. Individuals and funds currently receive a refund of franking credits if the franking credits they receive on dividends exceed their total tax payable. Those not paying tax, including superannuation funds where members are in pension mode, would be the most advantaged.

Shouldn’t the bold read as ‘most disadvantaged’?

 

[get me outta here]

I think it is correct due to the grandfathering. More grist for an interesting discussion. But, we do need to see what the actual proposed policy looks like without the scarry preempting. A party with this sort Hawke/Keating change will need to lay it out and possible water it down before the election.

Shouldn’t the bold read as ‘most disadvantaged’?

 

[Pushka]

I think it is correct due to the grandfathering. More grist for an interesting discussion. But, we do need to see what the actual proposed policy looks like without the scarry preempting. A party with this sort Hawke/Keating change will need to lay it out and possible water it down before the election.

They’ve said there won’t be grandfathering. Well, an article the other day said that.

 

[get me outta here]

Yes, quite a lot of differing views depending on the writer. Although it is early days on the policy which is out there to illicit views and consequences, I suspect that the majority of people who are in super funds, or on govt pensions will not see much difference.
I have none of the quals and experience of others in this thread though and am happy to be corrected.
Here is an 'old' quote from CEO David Whiteley of Industry Super Australia from March 18. Not sure how many billions and billions of $ they manage.

"Industry Super Australia (ISA) is supportive of the change, depending on where the additional revenue is directed.

ISA said the policy would have “little or not impact” on the superannuation of most Australians, and the revenue could be re-invested to modernise the super system.

ISA CEO David Whiteley said the proposal was sensible, and could improve fairness in the super system"

“Super funds where most Australians have their retirement savings will be largely unaffected by this proposal because the imputation credits are exhausted offsetting tax liabilities of the fund,” he said.

They’ve said there won’t be grandfathering. Well, an article the other day said that.

 

[serfty]

“Super funds where most Australians have their retirement savings will be largely unaffected by this proposal because the imputation credits are exhausted offsetting tax liabilities of the fund,” he said.

This is generally true.

What is also generally true is that many SMSF's will be significantly disadvantaged.

It's like they don't want individual people having control of their retirement money.

Self-managed superannuation funds to bear brunt of changes

---

After today, the exemption will not apply to SMSFs. Critics say Labor has therefore sharpened its attack on SMSFs while bestowing a lucrative advantage on pooled funds such as those owned by unions and banks.

The other significant group still hurt by the policy is self-fund retirees deriving an income from a share portfolio and SMSF Association chief executive John Maroney said even with the carve-out, one million Australians would be "unfairly disadvantaged".

This included many SMSF members receiving a partial age pension, who would be subject to an "unfair, two-tiered and complex" system.

"Potentially, these SMSF members are worse off than people with less savings but refundable franking credits and a part-pension," he said.

"The end result is to reduce people's incentive to save for retirement to achieve self-sufficiency."

Tax experts expect retirees to reset their share portfolios away from Australian equities, which are the shares that tend to carry fully franked dividends.

Some retirees will find it more advantageous to shift out of an SMSF to a pooled fund.

These funds are insulated from the franking credit change because they have enough members paying tax that that they are able to fully exhaust their franking credits.

SMSFs have only a few members and to the extent that they have any tax liabilities, these are quickly exhausted.

Under the Labor's proposed change, any excess franking credits will go to waste rather than being converted into refunds.

Financial Services Minister Kelly O'Dwyer said Labor's plan was designed to "crush SMSFs".

---

More explanation here Labor's new policy and how your SMSF clients will be affected

 

[Pushka]

Yes, quite a lot of differing views depending on the writer. Although it is early days on the policy which is out there to illicit views and consequences, I suspect that the majority of people who are in super funds, or on govt pensions will not see much difference.
I have none of the quals and experience of others in this thread though and am happy to be corrected.
Here is an 'old' quote from CEO David Whiteley of Industry Super Australia from March 18. Not sure how many billions and billions of $ they manage.

"Industry Super Australia (ISA) is supportive of the change, depending on where the additional revenue is directed.

ISA said the policy would have “little or not impact” on the superannuation of most Australians, and the revenue could be re-invested to modernise the super system.

ISA CEO David Whiteley said the proposal was sensible, and could improve fairness in the super system"

“Super funds where most Australians have their retirement savings will be largely unaffected by this proposal because the imputation credits are exhausted offsetting tax liabilities of the fund,” he said.

Ok, that is true but many super funds will be impacted. Many here have an SMSF where there is little opportunity to do this. As I posted upthread it’s almost entirely aimed at SMSF.

And guess what. Industry Super Funds have heavy Union representation.

@serfty has summarised it well, and that was my thinking when I first mentioned the Bolding being incorrect.

 

[get me outta here]

In my experience, those with interests in this will find an avenue around it somehow. It may take a while, but some 'adjustments' will be found. I have benefited by these myself in the past. The strategic SMSF advisers will come up with something, when they know what the policy is.

Industry funds, have whomever manages them, been leading in their returns. Depending on how's talking, either Labor will smash those who have an SMSF.... Or, the Liberals will try to get rid of Industry funds so as to back the private bank funds that have bigger fees. Of course both Industry funds and bank funds both benefit.

I still think that that the policy is at early days and it is fungible. Interesting the article serfty quoted starts, "After today, the exemption will not apply to SMSFs". Not sure what date that refers to.

 

[serfty]

Interesting the article serfty quoted starts, "After today, the exemption will not apply to SMSFs". Not sure w

Its the date of the policy announcement. Check the date on the AFR link.

 

[get me outta here]

I don't understand, that's an AFR March article which I cannot read, about something that may come in or not in some form after the next election if Labor wins? It says "After today ..." I'm missing something.

Its the date of the policy announcement. Check the date on the AFR link.

 

[serfty]

Basically, it means if Labour are able to enact their legislation, relevant changes will be backdated to the March date of the announcement.

 

[get me outta here]

They can do that? There may be some govt policy experts on here who can advise on backdating. An opposition announcing a policy a year out from an election expecting to be fully formed, well that's an interesting idea.

Basically, it means if Labour are able to enact their legislation, relevant changes will be backdated to the March date of the announcement.

 

[Pushka]

They can do that? There may be some govt policy experts on here who can advise on backdating. An opposition announcing a policy a year out from an election expecting to be fully formed, well that's an interesting idea.

I thought I read it would apply from July 1 2019 onwards. So this FY year is fine.

 

[QF WP]

Some further information that I have to hand about the proposed Labor changes...

Large super funds to be hit by franking credit changes

Poorer retirees to be hardest hit by ALP franking credit changes

I've got some charts from Plato as well, let me dig them out

 

[Pushka]

Some further information that I have to hand about the proposed Labor changes...

Large super funds to be hit by franking credit changes

Poorer retirees to be hardest hit by ALP franking credit changes

I've got some charts from Plato as well, let me dig them out

The trouble is that average Joe Blow ignores anything Super related and they don’t seem to get that anything to do with shares will impact on them. Labor has pretty much made it all about ‘big business’ needs to pay and that message gets heard but not the butterfly consequences.