{"id":1422,"date":"2022-11-29T05:17:20","date_gmt":"2022-11-29T05:17:20","guid":{"rendered":"https:\/\/actinvest.com.au\/?p=1422"},"modified":"2022-11-29T05:17:20","modified_gmt":"2022-11-29T05:17:20","slug":"draft-legislation-released-for-franking-credit-changes","status":"publish","type":"post","link":"https:\/\/actinvest.com.au\/index.php\/draft-legislation-released-for-franking-credit-changes\/","title":{"rendered":"Draft legislation released for franking credit changes"},"content":{"rendered":"<div>\n<p><strong>The government has released draft legislation on its measure to alter the tax treatment of off-market share buybacks.<\/strong><\/p>\n<\/div>\n<p><img loading=\"lazy\" alt=\"\" height=\"262\" src=\"https:\/\/acctweb.com.au\/images\/fp-franking-change.-DEC22.jpg\" width=\"475\" \/><\/p>\n<p>\u00a0<\/p>\n<div>\n<p>On late Thursday that government released draft amendments for consultation which will align the tax treatment of off-market share buybacks undertaken by listed public companies with the tax treatment of on-market share buybacks.<\/p>\n<p>This measure also includes commensurate amendments to the tax treatment of selective share cancellations for listed public companies.<\/p>\n<p>If passed, the legislation will mean that where a listed public company undertakes an off-market share buyback of a share or non-share equity interest, no part of the purchase price in response of the buyback will be taken to be a dividend.<\/p>\n<p>Additionally, distributions by listed public companies that are considered consideration for the cancellation of a membership interest as part of a selective reduction of capital will now be unfrankable.<\/p>\n<p>The amendments are set to commence on the first 1 January, 1 April, 1 July or 1 October to occur after the day this bill receives the Royal Assent.<\/p>\n<p>The amendments made by the bill will apply to buy-backs and selective share cancellations undertaken by listed public companies that are first announced to the market after 7:30pm by legal time in the Australian Capital Territory on 25 October 2022.<\/p>\n<p>The government\u2019s proposal regarding off-market share buybacks has been controversial, with some groups such as Wilson Asset Management stating that it will \u201cweaken the franking system\u201d.<\/p>\n<p>\u201cThis proposal will limit the distribution of franking credits via fully franked dividends where companies are returning capital to their shareholders through off-market share buybacks and it will mainly impact low-income earners, SMSFs and retirees,\u201d Wilson Asset Management chairman Geoff Wilson said earlier this month.<\/p>\n<p>The SMSF Association has also voiced some concerns about the measure, fearing it could have a substantial impact on SMSF investors.<\/p>\n<p>\u201cBased on Treasury\u2019s estimates they will have an impact of more than $500 million over the next few years. A lot of that will impact retirees in the SMSF sector so we think it could be quite a significant hit,\u201d said SMSF Association chief executive John Maroney.<\/p>\n<p>Speaking last week at an IPA event, Assistant Treasurer Stephen Jones said the proposal was merely an integrity measure to close a loophole which unfairly disadvantages ordinary taxpayers.<\/p>\n<p>He said off-market share buybacks were being used by large corporations such as BHP and Westpac to preference institutional investors and the amounts involved ran into billions.<\/p>\n<p>Mr Jones also gave a pledge that the franking credit system was \u201chere to stay\u201d in response to fears that Labor may be attempting to dismantle the franking credit system.<\/p>\n<p>\u201cI want to be very, very, very clear about one thing: franking credits, they\u2019re here to stay, end of story, full stop,\u201d said Mr Jones.<\/p>\n<p>\u201cThis policy is not about changing franking credits \u2014 ordinary mum and dad investors are going to continue to receive their dividends and their franking credits associated with that.<\/p>\n<p>\u201cOf course, they\u2019re still going to be able to participate in share buybacks schemes. Our changes are only to align the corporate tax treatment of on- and off-market share buybacks.\u201d<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>Miranda Brownlee<\/p>\n<p>21 November 2022<\/p>\n<p>smsfadviser.com<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<div>\n<p><strong>The government has released draft legislation on its measure to alter the tax treatment of off-market share buybacks.<\/strong><\/p>\n<\/div>\n","protected":false},"author":1,"featured_media":1423,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1422"}],"collection":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/comments?post=1422"}],"version-history":[{"count":1,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1422\/revisions"}],"predecessor-version":[{"id":1424,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/posts\/1422\/revisions\/1424"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media\/1423"}],"wp:attachment":[{"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/media?parent=1422"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/categories?post=1422"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/actinvest.com.au\/index.php\/wp-json\/wp\/v2\/tags?post=1422"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}