Frankly We Should Give a Damn: BDO calls for review of dividend imputation system as part of a holistic examination of Australia’s tax reform system

18 March 2018

Following Labor’s proposal to scrap cash refunds for franked dividends, BDO’s National Tax Director Lance Cunningham, has today spoken out saying targeting specific tax concessions is not the way forward. He believes the debate should be much wider and look at how such a move could fit into a holistic reform of Australia’s tax system.

“Most of the commentary around Labor's plan to axe cash refunds of excess imputation credits has been concentrating on the detrimental effects on small investors and self-managed superannuation funds (SMSF),” Mr Cunningham said.

“The real question is whether the refund of excess franking credits is good tax policy (almost no other countries have the equivalent of refunds of excess imputation credits).  However, to pull refunds of excess franking credits from the dividend imputation system altogether, without looking at the bigger tax picture is also not the optimal approach to reforming the system. Such a dramatic stand-alone action would have a major detrimental effect on many people who a have legitimately arranged their financial affairs to rely on the franking credit refunds.”

BDO advocates for a review of the dividend imputation system and imputation credits as part of a holistic examination of Australia’s tax reform system.

“BDO’s annual Tax Reform Survey, currently in its seventh year, includes questions on whether the imputation system should be changed and other important tax reform issues. In particular, we ask the public about whether the dividend imputation system should remain unchanged as it provides an incentive for Australians to invest in Australian companies that pay Australian taxes. As an alternative, we also query if the dividend imputation system should be changed as it currently encourages Australian companies to pay profits as franked dividends instead of using their profits to reinvest or expand their business.”

To have your say on these important questions, complete the 2018 BDO Tax Reform Survey