Question of the Week

Questions of the Week – Franking credits, a LIC and an ETF

Co-founder of the Switzer Report
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Question 1. With the Federal Election looming ever closer and the strong probability of Labor winning, my question is: I have an SMSF all in pension phase, no concessional contributions.  Could one commute part of one’s pension back to accumulation phase so as to use the franking credits that would be otherwise lost to Labor's policy change? If one was currently receiving around $5,000 to $10,000 in franking credits, how much would you have to roll back?

Answer (by Paul Rickard). If you were eligible to make a contribution (capped at $25,000), then you could apply those franking credits to reduce or eliminate the 15% tax on the contributions. Contributions are automatically are applied to the accumulation part of super until you elect to commence a pension. Moving money from a 0% tax state (pension) to a 15% tax state (accumulation), and then applying those franking credits to bring it back to a 0% tax state, won’t achieve any net benefit.

Question 2. I have enjoyed being a holder of WAM Capital (WAM), but at present it seems to be on a down run. Should I continue to hold?

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