One of the nation’s most respected and successful fund managers, stockpicker Geoff Wilson, has slammed Bill Shorten’s proposed changes to the nation’s dividend imputation system as punishing the “full gamut of Australian investors”.
Mr Wilson also warned the policy shift announced by the ALP could help feed a property bubble as investors switch from equities to property, both directly and in the form of real estate investment trusts (REITs), with potentially deleterious effects for the economy.
“There can be unintended consequences of this change — one will be moving money away from corporate structures to structures that don’t pay corporate tax. Those areas are REITs or direct property.’’
Labor says it will abolish the rebate component of the imputation credits system that benefits primarily high-wealth shareholders and self-managed super funds by allowing them to cash in unused imputation credits.
Mr Wilson, who leads a portfolio of listed investment companies that have more than $2.7 billion invested mainly in Australian shares on behalf of 60,000 investors — many of them retirees — believes the ALP’s new policy is just another case of political parties creating uncertainty by meddling with the rules.
“This is another example of the moving of the goalposts on Australian retirees. Creating more uncertainty when retirees need certainty,’’ Mr Wilson told The Australian.
“The majority of our 60,000 shareholders are self-managed superannuation fund trustees. Our shareholders and many like them are dependent on dividend income, of which franking credits play an integral part.”
Mr Wilson, who this year was named an officer in the general division of the Order of Australia for services to the business and finance sector, professional financial bodies and the community as a supporter of charitable foundations, said all investors could suffer the ALP’s dividend imputation policy, not just retirees.
“Labor’s planned challenge to the imputation system would see the full gamut of Australian investors hit.”
He said a more efficacious policy would be corporate tax reform.
“A better solution to the budget deficit would be to lower the corporate tax rate. This would reduce the burden of government franking payouts and drive investment in the Australian economy.”
Mr Wilson said other countries were envious of Australia’s dividend policy framework, while our corporate tax rates were much less attractive.
“Our dividend imputation system is the envy of the world while our corporate tax rate is uncompetitive against our global peers.”
Andrew Porter, from the Group of 100, a peak body representing CFOs of Australia’s biggest companies, said the principle of dividend imputation — that the owner of a company should only be taxed once on its profits — was a sound system and one that has “stood Australian corporates well”.
Mr Porter, who is also the CFO of the nation’s biggest listed investment company, Australian Foundation Investment Company, said the imputation system helped Australian companies raise capital during the GFC as it fuelled support from all Australian shareholders.
“Any policy that seeks to reduce the attractiveness of investing in Australian corporates needs to be carefully thought through, both in the interests of the particular class of shareholders that are targeted by this, and for the market as a whole.”