Investors again voice fears over dividend reform

In an unsurprising survey result, one of Australia’s largest listed investment companies has found that many Australian investors are deeply concerned by Labor’s proposed dividend imputation reforms.

Eighty-five per cent of nearly 15,000 shareholders to respond to a survey by the Australian Foundation Investment Company (AFIC) said that they relied on franking credits, with many noting that they’d face “significant” income losses should the policy go through.

AFIC managing director, Mark Freeman, said that shareholders were “distressed” by the changes as they’d planned to depend on them in their retirement “in good faith based on the current system”.

“We have received many stories from elderly retirees who are proud of working hard throughout their lives as well as living on modest means in order to save and be self-sufficient in retirement. They did this with an understanding of the current rules, knowing it takes a number of years to build up a retirement fund,” Freeman said.

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Attempting to counter Labor’s position that the reforms would only impact wealthy retirees, Freeman claimed that many respondents had planned to use the credits to fund a “modest quality of life in retirement”, earmarking them for groceries and medical expenses.

Freeman also suggested that the reforms could impact investment in Australian businesses, as franking credits were a “key reason” retail investors supported domestic companies’ capital raisings after the Global Financial Crisis.