Everyone is focussing on the cost of the proposed reductions in company tax rates, even the usually rational Ross Gittins, but it seems to me that it is a fake tax cut, that will benefit those who pay no Australian income tax, but not those who do.

The reason is that when any Australian tax payer receives a dividend from a company (which is where the profit goes), they receive also a franking credit they can deduct from their tax bill, so the tax the company paid on their profit is not paid twice.

The result is that if a company increases their dividend payout by the amount of the reduced tax, all the Australian tax payers who receive that additional dividend will lose all of it in increased income tax, whereas any foreigners will actually get the full value of the tax cut.

So the question is, why is no-one even mentioning this?

>So the question is, why is no-one even mentioning this?

Nobody realised until you pointed it out.

Bubblecar said:

>So the question is, why is no-one even mentioning this?

Nobody realised until you pointed it out.

Much as I’d like to see myself as a free thinker, who sees further by looking in the rubbish bins of giants, that seems very unlikely.

I’ve seen the same question (as a comment) somewhere else, but I can’t recall offhand where.

The Rev Dodgson said:

Everyone is focussing on the cost of the proposed reductions in company tax rates, even the usually rational Ross Gittins, but it seems to me that it is a fake tax cut, that will benefit those who pay no Australian income tax, but not those who do.

The reason is that when any Australian tax payer receives a dividend from a company (which is where the profit goes), they receive also a franking credit they can deduct from their tax bill, so the tax the company paid on their profit is not paid twice.

The result is that if a company increases their dividend payout by the amount of the reduced tax, all the Australian tax payers who receive that additional dividend will lose all of it in increased income tax, whereas any foreigners will actually get the full value of the tax cut.

So the question is, why is no-one even mentioning this?

those pinko leftists LNP haters at the ABC have mentioned it

http://www.abc.net.au/news/2016-03-21/long-the-flawed-trickle-down-economics-of-lower-company-tax/7264230

poikilotherm said:

The Rev Dodgson said:

Everyone is focussing on the cost of the proposed reductions in company tax rates, even the usually rational Ross Gittins, but it seems to me that it is a fake tax cut, that will benefit those who pay no Australian income tax, but not those who do.

The reason is that when any Australian tax payer receives a dividend from a company (which is where the profit goes), they receive also a franking credit they can deduct from their tax bill, so the tax the company paid on their profit is not paid twice.

The result is that if a company increases their dividend payout by the amount of the reduced tax, all the Australian tax payers who receive that additional dividend will lose all of it in increased income tax, whereas any foreigners will actually get the full value of the tax cut.

So the question is, why is no-one even mentioning this?

those pinko leftists LNP haters at the ABC have mentioned it

http://www.abc.net.au/news/2016-03-21/long-the-flawed-trickle-down-economics-of-lower-company-tax/7264230

That article makes some perfectly good pinko-leftie points (or rather it reports the pinko-leftie treasury making these points), but it doesn’t seem to mention my point about reduction in franking credits eating up the supposed benefits of these tax cuts to Australian income tax payers.

I think if there’s ever a Nobel Prize for Economics, you should win it…

The Rev Dodgson said:

Everyone is focussing on the cost of the proposed reductions in company tax rates, even the usually rational Ross Gittins, but it seems to me that it is a fake tax cut, that will benefit those who pay no Australian income tax, but not those who do.

The reason is that when any Australian tax payer receives a dividend from a company (which is where the profit goes), they receive also a franking credit they can deduct from their tax bill, so the tax the company paid on their profit is not paid twice.

The result is that if a company increases their dividend payout by the amount of the reduced tax, all the Australian tax payers who receive that additional dividend will lose all of it in increased income tax, whereas any foreigners will actually get the full value of the tax cut.

So the question is, why is no-one even mentioning this?

2 things here…

- not all companies pay dividends
- not all companies will increase dividends by the amount saved on income tax

The Rev Dodgson said:

poikilotherm said:

The Rev Dodgson said:

Everyone is focussing on the cost of the proposed reductions in company tax rates, even the usually rational Ross Gittins, but it seems to me that it is a fake tax cut, that will benefit those who pay no Australian income tax, but not those who do.

The reason is that when any Australian tax payer receives a dividend from a company (which is where the profit goes), they receive also a franking credit they can deduct from their tax bill, so the tax the company paid on their profit is not paid twice.

The result is that if a company increases their dividend payout by the amount of the reduced tax, all the Australian tax payers who receive that additional dividend will lose all of it in increased income tax, whereas any foreigners will actually get the full value of the tax cut.

So the question is, why is no-one even mentioning this?

those pinko leftists LNP haters at the ABC have mentioned it

http://www.abc.net.au/news/2016-03-21/long-the-flawed-trickle-down-economics-of-lower-company-tax/7264230

That article makes some perfectly good pinko-leftie points (or rather it reports the pinko-leftie treasury making these points), but it doesn’t seem to mention my point about reduction in franking credits eating up the supposed benefits of these tax cuts to Australian income tax payers.

From the pinkos again;
“The ultimate owners of companies are people, and they pay income tax on their dividend earnings. If the company is paying less tax, then the franking credit on the dividends is reduced, so the amount the individual shareholders have to pay to make up the difference goes up by the same amount. The net effect is zero. The resulting economic growth is also zero.”

poikilotherm said:

The Rev Dodgson said:

poikilotherm said:

those pinko leftists LNP haters at the ABC have mentioned it

http://www.abc.net.au/news/2016-03-21/long-the-flawed-trickle-down-economics-of-lower-company-tax/7264230

That article makes some perfectly good pinko-leftie points (or rather it reports the pinko-leftie treasury making these points), but it doesn’t seem to mention my point about reduction in franking credits eating up the supposed benefits of these tax cuts to Australian income tax payers.

From the pinkos again;
“The ultimate owners of companies are people, and they pay income tax on their dividend earnings. If the company is paying less tax, then the franking credit on the dividends is reduced, so the amount the individual shareholders have to pay to make up the difference goes up by the same amount. The net effect is zero. The resulting economic growth is also zero.”

the ‘theory’ is that the saving is reinvested in growth strategies (employing more people, buying more of other good or services, etc…), not simply paid out as dividends

the problem with Reaganomics is that it assumes people will be foot loose and fancy free and grow their businesses in times of economic downturn, when the fact is, people will always be far more cautious with profits when there is greater uncertainty in the market.

diddly-squat said:

poikilotherm said:

The Rev Dodgson said:

That article makes some perfectly good pinko-leftie points (or rather it reports the pinko-leftie treasury making these points), but it doesn’t seem to mention my point about reduction in franking credits eating up the supposed benefits of these tax cuts to Australian income tax payers.

From the pinkos again;
“The ultimate owners of companies are people, and they pay income tax on their dividend earnings. If the company is paying less tax, then the franking credit on the dividends is reduced, so the amount the individual shareholders have to pay to make up the difference goes up by the same amount. The net effect is zero. The resulting economic growth is also zero.”

the ‘theory’ is that the saving is reinvested in growth strategies (employing more people, buying more of other good or services, etc…), not simply paid out as dividends

the problem with Reaganomics is that it assumes people will be foot loose and fancy free and grow their businesses in times of economic downturn, when the fact is, people will always be far more cautious with profits when there is greater uncertainty in the market.

slow down poindexter

poikilotherm said:

diddly-squat said:

poikilotherm said:

From the pinkos again;
“The ultimate owners of companies are people, and they pay income tax on their dividend earnings. If the company is paying less tax, then the franking credit on the dividends is reduced, so the amount the individual shareholders have to pay to make up the difference goes up by the same amount. The net effect is zero. The resulting economic growth is also zero.”

the ‘theory’ is that the saving is reinvested in growth strategies (employing more people, buying more of other good or services, etc…), not simply paid out as dividends

the problem with Reaganomics is that it assumes people will be foot loose and fancy free and grow their businesses in times of economic downturn, when the fact is, people will always be far more cautious with profits when there is greater uncertainty in the market.

slow down poindexter

I read an interesting story the other day that describes the situation where, the the US over the last financial year, total corporate payouts to shareholders (in both dividends and buybacks) was more than the total corporate earnings.

so much for trickling down

diddly-squat said:

The Rev Dodgson said:

Everyone is focussing on the cost of the proposed reductions in company tax rates, even the usually rational Ross Gittins, but it seems to me that it is a fake tax cut, that will benefit those who pay no Australian income tax, but not those who do.

The reason is that when any Australian tax payer receives a dividend from a company (which is where the profit goes), they receive also a franking credit they can deduct from their tax bill, so the tax the company paid on their profit is not paid twice.

The result is that if a company increases their dividend payout by the amount of the reduced tax, all the Australian tax payers who receive that additional dividend will lose all of it in increased income tax, whereas any foreigners will actually get the full value of the tax cut.

So the question is, why is no-one even mentioning this?

2 things here…

- not all companies pay dividends
- not all companies will increase dividends by the amount saved on income tax

True, but: – for those companies that retain their profits (thus costing their share-holders the value of the franking credits) that money will end up as capital gain, which doesn’t have any franking credits entitlement.
- for companies that retain all of the tax saving, the tax payable by share holders will increase by the same amount, so there is no change in government revenue, and a temporary transfer of funds from share holders to company. Of course the share holders still get it in the end, when they sell the shares, but then they have to pay tax on the capital gain, so at that stage the share holder gets a reduced amount, with the difference going to the government.

poikilotherm said:

From the pinkos again;
“The ultimate owners of companies are people, and they pay income tax on their dividend earnings. If the company is paying less tax, then the franking credit on the dividends is reduced, so the amount the individual shareholders have to pay to make up the difference goes up by the same amount. The net effect is zero. The resulting economic growth is also zero.”

OK, that one is exactly the point I am making.

Looks like I’ll have to share my Nobel.

From 1/07/2015, small businesses have already had their tax rate reduced to 28.5%. IIRC, any “fully franked” dividends paid by these companies will allow shareholders to claim the full 30% refund. Now that is real tax break to the shareholders of these small businesses, but is obviously limited to the profits that could be made on <$2m turnover.

poikilotherm said:

From the pinkos again;
“The ultimate owners of companies are people, and they pay income tax on their dividend earnings. If the company is paying less tax, then the franking credit on the dividends is reduced, so the amount the individual shareholders have to pay to make up the difference goes up by the same amount. The net effect is zero. The resulting economic growth is also zero.”

Nice article, written I note, not by those middle-of-the-roaders at the ABC, but rather one of those notorious lefties, the owner of a small business.

The Rev Dodgson said:

poikilotherm said:

From the pinkos again;
“The ultimate owners of companies are people, and they pay income tax on their dividend earnings. If the company is paying less tax, then the franking credit on the dividends is reduced, so the amount the individual shareholders have to pay to make up the difference goes up by the same amount. The net effect is zero. The resulting economic growth is also zero.”

Nice article, written I note, not by those middle-of-the-roaders at the ABC, but rather one of those notorious lefties, the owner of a small business.

Dirty commie pinko bastards those small business owners, paying themselves dividends and not giving anything back.

The agile Mr Jobson is planning for a steady increase in taxes throughout the first decades of his glorious reign.

share imputation as I understand it works better for those with smaller tax returns for the year
rich men put shares in their wife’s name to make it work best

wookiemeister said:

share imputation as I understand it works better for those with smaller tax returns for the year
rich men put shares in their wife’s name to make it work best

takes notes

wookiemeister said:

share imputation as I understand it works better for those with smaller tax returns for the year
rich men put shares in their wife’s name to make it work best

Not really. If your marginal rate, x, is > 30% you will pay x-30% tax on the dividend, but you still get the full value of the imputation. The only people who don’t get the full value of the imputation are those who pay < 30% tax (marginal rate).

The Rev Dodgson said:

wookiemeister said:

share imputation as I understand it works better for those with smaller tax returns for the year
rich men put shares in their wife’s name to make it work best

Not really. If your marginal rate, x, is > 30% you will pay x-30% tax on the dividend, but you still get the full value of the imputation. The only people who don’t get the full value of the imputation are those who pay < 30% tax (marginal rate).

Of course, if you are highly taxed, and you know someone who is happy to share their earnings with you, who has a low rate of tax, it makes sense to buy them shares, because the dividend will have less tax taken out. But that is because they have a lower tax rate, not because of imputation.

And if you are as rich as Malcolm Turnbull you will have managed your affairs so you are on a low rate of tax anyway.

The Rev Dodgson said:

And if you are as rich as Malcolm Turnbull you will have managed your affairs so you are on a low rate of tax anyway.

I hear that Panama is a great place.

The Rev Dodgson said:

wookiemeister said:

share imputation as I understand it works better for those with smaller tax returns for the year
rich men put shares in their wife’s name to make it work best

Not really. If your marginal rate, x, is > 30% you will pay x-30% tax on the dividend, but you still get the full value of the imputation. The only people who don’t get the full value of the imputation are those who pay < 30% tax (marginal rate).

Those who pay <30% tax can claim a refund for the difference, so they still get the full value of the imputation.

Went to physio for my neck again today and he did this horrible thing called acupuncture. It was very unpleasant and still aches. He says I will still need a few more sessions of it :(

Stuck in thread. Sorry.

Speedy said:

The Rev Dodgson said:

wookiemeister said:

share imputation as I understand it works better for those with smaller tax returns for the year
rich men put shares in their wife’s name to make it work best

Not really. If your marginal rate, x, is > 30% you will pay x-30% tax on the dividend, but you still get the full value of the imputation. The only people who don’t get the full value of the imputation are those who pay < 30% tax (marginal rate).

Those who pay <30% tax can claim a refund for the difference, so they still get the full value of the imputation.

Yes, I got that bit wrong. It should be:

The only people who don’t get the full value of the imputation are those whose tax bill is less than their imputation credits.

Speedy said:

Went to physio for my neck again today and he did this horrible thing called acupuncture. It was very unpleasant and still aches. He says I will still need a few more sessions of it :(

It will feel better when he stops sticking needles in.

The Rev Dodgson said:

Speedy said:

The Rev Dodgson said:

Not really. If your marginal rate, x, is > 30% you will pay x-30% tax on the dividend, but you still get the full value of the imputation. The only people who don’t get the full value of the imputation are those who pay < 30% tax (marginal rate).

Those who pay <30% tax can claim a refund for the difference, so they still get the full value of the imputation.

Yes, I got that bit wrong. It should be:

The only people who don’t get the full value of the imputation are those whose tax bill is less than their imputation credits.

They still get a refund though.

For example, a person whose only source of income is a fully franked distribution of $700.00 will claim a $300.00 refund, being the tax paid by the company.

AwesomeO said:

Speedy said:

Went to physio for my neck again today and he did this horrible thing called acupuncture. It was very unpleasant and still aches. He says I will still need a few more sessions of it :(

It will feel better when he stops sticking needles in.

The needles going in weren’t a problem at all. It was the jiggling around of them 5 minutes later. This was an intentional thing to try to get the muscles to twitch and spasm. He says that when they relax again after the acupuncture, they will return to a state which is more relaxed than beforehand, making it easier to stretch and loosen knots.

Speedy said:

AwesomeO said:

Speedy said:

Went to physio for my neck again today and he did this horrible thing called acupuncture. It was very unpleasant and still aches. He says I will still need a few more sessions of it :(

It will feel better when he stops sticking needles in.

The needles going in weren’t a problem at all. It was the jiggling around of them 5 minutes later. This was an intentional thing to try to get the muscles to twitch and spasm. He says that when they relax again after the acupuncture, they will return to a state which is more relaxed than beforehand, making it easier to stretch and loosen knots.

Did he write that in capital letters and a strange font?

Speedy said:

The Rev Dodgson said:

Speedy said:

Those who pay <30% tax can claim a refund for the difference, so they still get the full value of the imputation.

Yes, I got that bit wrong. It should be:

The only people who don’t get the full value of the imputation are those whose tax bill is less than their imputation credits.

They still get a refund though.

For example, a person whose only source of income is a fully franked distribution of $700.00 will claim a $300.00 refund, being the tax paid by the company.

But if your income was $700 your income tax (before refund) would be zero.

You don’t get the $300, do you?

Or have I got that wrong?

The Rev Dodgson said:

Or have I got that wrong?

A quick search suggests that I did indeed have it wrong.

So all Australian residents, who would be liable for Australian income tax if they earned enough, get the full franking credits whether they actually pay income tax or not.

The Rev Dodgson said:

The Rev Dodgson said:

Or have I got that wrong?

A quick search suggests that I did indeed have it wrong.

So all Australian residents, who would be liable for Australian income tax if they earned enough, get the full franking credits whether they actually pay income tax or not.

That seems a bit on the fair side. Surely it should e changed ASAP.

sibeen said:

The Rev Dodgson said:

The Rev Dodgson said:

Or have I got that wrong?

A quick search suggests that I did indeed have it wrong.

So all Australian residents, who would be liable for Australian income tax if they earned enough, get the full franking credits whether they actually pay income tax or not.

That seems a bit on the fair side. Surely it should e changed ASAP.

I can only think that Mal and Scott have not yet received a briefing on this fairness.

The Rev Dodgson said:

The Rev Dodgson said:

Or have I got that wrong?

A quick search suggests that I did indeed have it wrong.

So all Australian residents, who would be liable for Australian income tax if they earned enough, get the full franking credits whether they actually pay income tax or not.

I for one am shocked