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I’ve seen a lot of debate about Labor’s proposed change to franking refunds and suggestions SMSFs should close their fund and transfer to industry or corporate funds. Isn’t this just jumping from frying pan to pot as there will be significant fees to be paid to that fund more or less offsetting any franking credit loss ? This is without considering the loss of control in decision making etc.
A: Most industry super funds, if not all, are net taxpayers.
If you transfer your super monies and they use your funds to invest in a similar mix of assets including shares paying fully franked dividends, then their tax bill should reduce.
How they will apportion this benefit is not clear. I have seen no statement that says that they will pass on the tax benefit (lower overall tax cost) to the superannuant who transferred in the funds (remember – this a person in pension phase who is not paying any tax).
The industry or corporate fund could also prove to be a more expensive option.
Assuming Labor wins government, any changes to the franking credit regime will require legislation. With most members of the current Senate cross-bench saying that they oppose the plan, it is by no means certain that the current proposal will get up as is. My counsel is to take no action at this point in time.
