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A survey of 632 SuperConcepts SMSF trustees revealed plans to radically change investment patterns amid concern that Labor’s proposal to remove refundable franking credits would negatively impact pension incomes.
More than 72% of respondents said they would change their investment strategy to compensate for the loss of franking credit income.
“The survey establishes first-hand from SMSF trustees what impact the proposed change by Labor would have on their SMSF strategy and investment choice,” said Natasha Fenech, SuperConcepts CEO.
“International shares were the most popular alternative investment with 61.6% of respondents saying that their share portfolio will shift to foreign markets.
“This is a big concern for the Australian Stock Exchange, a big concern for local companies contemplating the cost of capital from overseas sources, and a big concern for the future ownership of local firms if its no longer viable for locals to invest,” said Ms Fenech.
Managed funds, term deposits, fixed interest and property attracted between 27% to 25% of respondents interest as an alternative to Australian shares that pay fully franked dividends. 3% of responders were unsure of what action they would take, but mostly viewed the proposal as something that would impact them negatively.
Closing an SMSF was also a serious consideration if Labor’s policy proposal succeeds at the 2019 election.
“It is concerning that 14.5% of respondents are thinking of closing their SMSF as a result of this policy which doesn’t apply tax policy consistently to individuals across different superannuation structures, while 1.4% thought that they might withdraw their super and go to an aged pension,” said Ms Fenech.
“SMSFs play a critical role in the super sector to provide choice and competition against industry and retail funds, and it’s clear that everyone benefits from the competition as it keeps fees in check when consumers have adequate choice in the market.
“Without a doubt this is one of the most pressing election issues facing SMSFs in pension phase and the choices being forced on them are not what they want. It will drive capital away from Australian companies and therefore doesn’t allow for Australians to support brands remaining locally owned,” said Natasha Fenech, SuperConcepts CEO.
• 66.8% of the responders viewed the proposal as something that will impact them a great deal with 20.3% expecting a significant impact and another 8.9% moderate.
• Only 4% of responders believe that the proposal would have little or no effect on their SMSF.
The survey was sent out to 4,001 trustees, out of which 632 responded.
As of 30 June 2017 ATO figures show 597,000 SMSFs holding $697 billion in assets, with more than 1.1 million members.
SuperConcepts is the largest provider of SMSF services in Australia with more than 60,000 funds under management.
FRANKING CREDIT FIGHTBACK
COMMENT: Labor Party franking credit policy is a big stick to SMSFs that will be felt by all
Data analysis shows lower income retirees to be hardest hit by ALP franking credit proposal
Submission: Labor franking credit policy reduces competition and choice
