ASFA warns of $1.6m cap impact on franking credits proposal

The Australian Labor Party would be well-served allowing the impact of the Government’s $1.6 million cap to be fully manifested before it embarks on its proposed changes to franking credits, according to key superannuation industry organisation, the Association of Superannuation Funds of Australia (ASFA).

In a submission filed with the House of Representative Standing Committee on Economics, ASFA noted, however, that its preliminary analysis had noted that the Labor proposal would not have a significant impact on most large superannuation funds.

“…we have undertaken some preliminary analysis on the impact of the proposal on members in [Australian Prudential Regulation Authority] APRA‐regulated funds and it would appear the impact is not likely to be significant,” the submission said.

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However, it said this analysis excluded funds that catered exclusively to members with accounts in the tax-free retirement phase, some Eligible Rollover Funds, certain closed defined benefit funds and some smaller corporate funds.

The ASFA submission then noted that the available data clearly suggested that the biggest impact would relate to self-managed superannuation funds (SMSFs) and small APRA funds.

“In ASFA’s view, tinkering with policy settings ultimately undermines confidence in the superannuation system, at a time when we want to encourage more people to be self‐funded in retirement,” the submission said.

“The system has a $1.6 million cap in the retirement phase and we consider that a period of stability is needed to ensure that recent reforms to superannuation and the retirement funding system are bedded down and working.”

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