Franking credits and public education

Press Release 782

                                         

     

                                     AUSTRALIAN COUNCIL FOR THE DEFENCE OF GOVERNMENT

SCHOOLS

PRESS RELEASE 782

Franking credits and public education

Here is Maralyn Parker, a public education advocate, comparing public education funding with withdrawal of ‘franking credits’ for retirees on Twitter:

The Morrison Govt gives $5.9 billion a year (yes every year) to 4% of the Australian population in cash tax rebates for franked shares. It gives less than $5 billion each year to public schools. This is mind-blowingly stupid. Public education is an investment for ALL Australians.

11:07 PM - 3 Feb 2019

These are strong arguments for public school voters to prefer a Labor to a Coalition Government.

What are franking credits and What is the truth of this claim?

Franking Credits

Franking Credits also known as Imputation Credits are a type of tax credit that allows Australian Companies to pass on tax paid at the company level to shareholders.  The benefits are these franking credits can be used to reduce income tax paid on dividends or potentially be received as a tax refund.

Basically franking credits stop the double taxation of company profits as the tax paid at company level can be passed to the shareholder.

Under this system, the Australian Tax Office recognises that corporate tax has already been paid on profits distributed as dividends. This already-paid tax can be transferred to investors using franking credits, reducing their tax liability.

According to a joint statement by Bill Shorten and Chris BowenSelf-managed super funds are a major beneficiary, with 50 per cent of the benefit to SMSFs accruing to the top 10 per cent of SMSF balances – with some funds receiving cash refunds of more than $2.5 million a year. Pensioners, i.e. those who receive limited superannuation payments, are exempt.

 

Where does the $5 Billion figure come from?

It comes from Chris Bowen, the Shadow Treasurer at https://www.chrisbowen.net/issues/labors-dividend-imputation-policy/

 

A Shorten Labor Government will close down the concession created by Howard and Costello, and return to the arrangement first introduced by Hawke and Keating – so that imputation credits can be used to reduce tax, but not for cash refunds.

Closing down this concession will save the budget $11.4 billion over the forward estimates from 2018-19, and improve the budget bottom line by $59 billion over the medium term.

These are impressive figures.  

But Public Education supporters should be very wary. A Shorten Government is no different to a Morrison Government in preferential treatment of a religious system of education to a public, national system. For every billion given to public schools a greater amount is diverted into religious systems.

Not one dollar has ever been taken from the religious system since 1969, while Labor, as well as Liberal governments throughout Australia have been prepared to withdraw funds and close public schools.

Watch this space.

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