The government’s proposed $600 million curtailing of franking credits connected to capital raisings and share buybacks will face a Senate committee inquiry.
The Albanese government’s proposed $600 million curtailing of franking credits connected to capital raisings and share buybacks will face a Senate committee inquiry.
The proposed tightening of the law could disallow some franking credits paid to retail shareholders and superannuation funds which receive dividends that have been fully or partly funded by an equity capital raising.The measure, estimated by Treasury to save the budget a modest $10 million a year, was originally proposed by Scott Morrison as treasurer in 2016 but was never followed through on.
“If legislated, these measures will result in grave consequences for the competitiveness of Australian companies. “We are disappointed that the main penalty where a company falls foul of these provisions, and franks what should be an unfrankable dividend, will be visited upon its shareholders. The strategy is, in effect, a capital return, dressed up as a franked dividend, enabled by a share buyback.
But many advisers remain concerned about the other seemingly modest revenue-raising measure involving capital raisings, arguing the drafting of the legislation means it could potentially capture many companies which raise equity capital.
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