Money, Money and Retirement, philandtomplus.com

Push-back to Pensions

WOW… can you see any problems here?

I was in my research and development lab and come across this article in the Herald Sun on Sunday November 18th, 2018, “Pushback to pensions – Labor franking policy to hit retirees”
The article was written by Sophie Elsworth and Anthony Keane and highlights why you need to take a “helicopter approach” to get above it all, and protect yourself against the government of the day and their whims when it comes to changing the rules when dealing with an Australian Old Age Pension. In short you need to find a sustainable cash-flow you can rely on in your senior years.

Retirees John and Lynnette Gates are worried the potential changes by federal Labor could result in them losing $17,000 a year.

INVESTORS reliant on share returns are set to have their cash refunds slashed amid fears changes to tax credits could push tens of thousands of people on to the aged pension.

If elected next year, the federal Labor Party is set to deny investors franking credit cash refunds on their shares, hitting the hip pockets of Australians with share portfolios.

It will not just impact self funded retirees but also those on low incomes who rely heavily on cash refunds from Australian shares.

National Seniors Australia’s chief advocate Ian Henschke warned it could result in “odd behaviour” by those on the cusp of getting a pension “because the franking credit issue is affecting hundreds of thousands of retirees”.

“It could see more people going on the pension,” he said.

Mr Henschke said it could result in those hoping to keep their cash refunds having to get rid of some of their assets, which are means tested for pension eligibility.

Labor said under the proposed changes which would not be grandfathered — it would exempt age pensioners, part pensioners, veterans pensioners and income support recipients under the massive revamp to the nation’s dividend imputation system.

Latest figures from Treasury papers showed in 2014-15 individual share investors raked in $2.3 billion in franking cash credits.Of those, more than half who received cash refunds (671,400) had incomes below the $18,201 tax-free threshold.

About 95 per cent of 1.07 million Australians had taxable incomes of less than $65,000.

Dividends paid from company profits are subject to Australia’s company tax rate of 30 per cent. This means shareholders receive a rebate for the tax paid by the company onprofits
distributed to them as dividends.

Sydney self-funded retiree Wayne Hampton, 65, a retired financial adviser, labelled the changes
“unfair and It discriminates against self-funded retirees who have done everything right according to the superannuation rules to accumulate funds so they are not relying on government assistance”

Under the proposed changes there would be a “pensioner guarantee” for full or part-pensioners which means they would be excluded from the changes.

If Labor is elected at the next federal election the policy would start on July 1, 2019.

The Self-Managed Super Fund Association’s chair, Dr Deborah Ralston, warned that many low-income Australians would also be impacted.
“Many of these Australians are retirees on zero or low marginal tax rates, who have little superannuation and are reliant on the dividends and cash franking credit refunds from Australian shares to provide a proportion of their retirement incomes,” she said.

Melbourne-based self funded retirees John and Lynette Gates, aged 94 and 87, have been completely self-sufficient in retirement and said the changes would leave them $17,000 worse off a year. “I know how to manage my finances but I can’t see any way I’m going to pick up this $18,000 that Bill Shorten tends to grab every year,” Mr Gates said.

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