By Glenda Korporaal
Financial Services Minister Stephen Jones has indicated that the government could scrap the retrospective nature of its proposed franked dividend crackdown.
The new laws were proposed to be backdated to take in dividends paid from December 2016, the date when they were proposed by the then treasurer Scott Morrison.
On Wednesday, Mr Jones indicated that the government was determined to push ahead with the law which would seek to strip franking credits from dividends paid out as a result of a capital raising – a move it describes as a tax integrity measure.
Distributions that are paid outside or in addition to a company’s normal dividend cycle and are funded by capital raisings will no longer be allowed under the proposed change.
But Mr Jones indicated the government was prepared to consider the criticisms from shareholder groups about the proposed laws, including that it was retrospective.
In an interview with Sky News on Wednesday, Mr Jones said the government was prepared to “listen seriously” to the feedback it got from its exposure draft.
The consultation period for the proposed legislation ends on Wednesday – a period which critics have described as too short.
Mr Jones rejected calls from one of the critics of the legislation, Wilson Asset Management chairman Geoff Wilson, to extend the consultation period.
He said that while the government was prepared for genuine consultation, that would not take place “endlessly”. Although it announced the proposal in 2016, the former government did not move to implement them.
While Jim Chalmers has said the move is not related to the major changes taken by Labor to the 2019 election – proposals which were controversial among voters – the surprise announcement of the government’s plan has led to fears that the new laws could have a much broader potential application than has been made public.
The chief executive of the Australian Shareholders’ Association, Rachel Waterhouse, warned that the proposed legislation on franking credits could “create a panic” among retail shareholders, particularly those planning to rely on franked dividends to fund their retirement.
“It is a surprise to us and to retail shareholders that this is being considered,” she said.
Mr Jones told Sky News on Wednesday that the proposed law was designed to head off the potential for companies using franked dividends as an asset for new capital raisings.
He said the law needed to be changed to prevent franking credits being used “for a purpose they were never intended.” “This is about an integrity measure to ensure that every taxpayer is paying no more, no less, than they are supposed to,” he said.
Mr Jones said the government planned to respond to the submissions made during the consultation period “sooner rather than later”.
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