Dividend imputation removal will cost retirees $4,000 a year

11 August 2015
| By Jassmyn |
image
image
expand image

Abolishing the dividend imputation system will reduce the annual income of the average retiree by $4,000, according to the Association of Superannuation Funds of Australia (ASFA).

ASFA's dividend imputation report found the abolition of either the dividend imputation or the current system of refundable franking credits would have the biggest negative impact on retirees, superannuation fund members, and low to middle income earners, who would lose the current refund benefits on their zero or low tax rates.

ASFA's chief executive, Pauline Vamos said removing the dividend imputation might seem like a quick revenue fix for the government but will have negative long-term effects on retirement savings.

"Currently, dividend imputation over both the accumulation and retirement stages leads to an approximate 13 per cent increase in retirement income streams. For a worker on an average income this equates to $4,000 more in retirement per annum," she said.

"Even with the benefit of dividend imputation, only 35 per cent of Australians are retiring with enough superannuation to live a comfortable lifestyle — we clearly need to be helping Australians to bolster these savings instead."

As a consequence to the decrease in retirement income streams, Australian taxpayers would then bear around half the cost through increased public pension entitlement.

At the same time the complete removal of the dividend imputation may reduce investment in domestic equities.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

11 months ago
Kevin Gorman

Super director remuneration ...

11 months 1 week ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

11 months 1 week ago

Westpac has delayed its rate cut forecast, aligning with its peer NAB’s outlook on the likely trajectory for the Reserve Bank of Australia’s cash rate....

11 hours 51 minutes ago

The government’s adjustment to the Future Fund’s mandate could set a dangerous precedent, warns an economist, raising concerns that it may pave the way for problematic fu...

11 hours ago

The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remain...

13 hours 13 minutes ago