Chris Bloxham

The “lazy tax” paid by apathetic ozzies who leave their superannuation dollars in retail fund accounts was again highlighted this week by 3 separate highly publicised matters.

Firstly, the class action filed against QSuper in the Federal Court by Shine lawyers on behalf of 140,000 of its own members who had been deceived into paying higher life insurance premiums by their own trustee. The next egregious deceit perpetrated on the poor old QSuper members, most of whom are teachers and health care workers in Queensland, is the fallout from the franking credit stripping scheme.

The ATO may be imposing a record penalty on QSuper in relation to this malfeasance by the people running QSuper – however its the members who will be footing the bill for any interest or penalties ultimately imposed – & from the sounds of it, there’s gunna be heaps! What a lot of retail members do not know or understand is that much of the supposed “performance” of big superfunds is delivered by franking credit arbitrage & has absolutely nothing to do with achieving superior returns. People inside retail super are all too aware of this rouse – yet another deceit to add to the long & growing list.

And if these first 2 humdingers weren’t impressive enough…

Perhaps most on the nose is the various applications to sundry courts around the country to allow retail superfunds to amend their constituent deeds allowing the funds to charge unsuspecting members a new class of fees to build “TFCR” buffers. Trustee Financial Contingency Reserves are essentially legalised theft from current members to protect degenerate fund managers inside the superfund against the worst of their own proclivities – the minister for superannuation, Jane Hume, said it best:

“Let’s not kid ourselves as to what this really is; taking member’s money out of their retirement savings to set up a pool of funds – owned by the trustee – to ensure they can pay for penalties due to their own misconduct”: nestegg, 23.11.21.

The entire retail super industry exists on inertia & apathy. These 2 ingredients when mixed together with a healthy sprinkling of deceit create the ideal conditions for unbridled immorality.

If you are wanting to exit the swamp, call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au to discuss your options.

What are Franking Credits?

Some people think that when you pay income tax, you get nothing back in return. A lot of clients say to me, “show me how to pay less tax?” It’s an instinctive reaction to seek to minimise your income tax expense everywhere you can.

Sometimes those same people set up a company to run a business through. Understandably, they seek to also minimise the income tax paid by the company. What many of those people don’t understand is that there’s a key difference between the income tax paid by them personally and the income tax paid by the company. The difference is that the company can pass on every dollar of value it has paid as income tax to the shareholders using franking credits.

In simple terms, franking credits are a refund of income tax paid by a company to the shareholders of that company.

Why are Franking Credits important to you?

The reason why this is important to understand is that this “franking credit refund” or “tax shield” can be used by company shareholders to reduce their personal income tax expense. It doesn’t matter that the company is the entity that has paid the income tax in the first place, the law allows the shareholder to claim it back in their own income tax return. This tax shield works even better if the shareholder of the company is a self managed superfund because it is income taxed at a much lower rate than most individuals are.

For more information, call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au.