Removal of dividend imputation refunds will erode retirement incomes

The Association of Superannuation Funds of Australia (ASFA) today said the proposed removal of refunds for dividend imputation credits could have a significant impact on low-income retirees both inside and outside the superannuation system.

“Constant tinkering with the settings ultimately undermines confidence in the superannuation system, at a time when we want to encourage more people to be self-funded in retirement,” said ASFA CEO, Dr Martin Fahy.

“The system already has a $1.6 million cap in the retirement phase and our analysis shows recent reforms to superannuation and the retirement funding system are working with time needed for these changes to be bedded down.

“If there is a concern about individuals with large retirement savings receiving the benefit of refundable imputation credits then this would be better addressed by measures more closely linked to retirement balance.

“At face value, it appears that this proposal would impact Mum and Dad investors both through their superannuation and through the shares they own outside of super and compromise the long standing investment neutrality principle.

“There are a range of critical questions which need to be addressed, including whether the proposal would drive a bias to certain asset classes or distort the system in other ways.

“As always, the devil is in the detail and there is potential for a number of unintended consequences, depending on how the mechanism is designed, with the most important question being the impact on retirement incomes.”

ASFA will undertake further analysis to determine the potential impact of the proposal.

“At a time of increasing longevity and rising costs of health and aged care, it’s critical that we do everything we can to maximise income for retirees,” concluded Dr Fahy.

For further information, please contact:

Katrina Horrobin, 0451 949 300.

About ASFA

ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.