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1/ Ok, so I'm getting a little sick of the #FrankingCredits debate. I'm a tax accountant and I deal with franking credits all the time, so here's a few numbers: #auspol
2/ Let's look at a person who has a "modest" franking credit refund of $20,000. This person will also have a "Franked dividend" of ~$46,600. That's $46,600 of cash (or potentially reinvestment, more on that later).
3/ Now, the value of these shares (based on a 4% dividend yield, which is the average market yield), would be $1,165,000. Yes, that's 1 million, 1 hundred and 65 thousand.
4/ So these people are hardly poor, in addition, they likely own their own house (at least) and potentially other assets. They can even liquidate these shares over a number of years and end up paying no tax if they know what they're doing.
5/ So currently many people's strategy is to dump all their money in shares, and then reinvest the cash dividend (so an extra $46,000 added to that $1mil in just that year) and then claim the franking credit on their $0 of income for tax purposes.
6/ This is not sustainable tax policy, and frankly, the main benefit of it goes to the wealthy. Labor is right to abolish the cash refund portion of the policy.
