Tax changes are being prepared by the Albanese government that will controversially impact franking credit refunds, according to Naz Randeria, managing director of Reliance Auditing Services. <\/p>\n\n\n\n
The proposed legislation aims to double the tax rate applied to super fund balances exceeding $3 million and will also tax unrealised capital gains within these accounts. This means Australians will be taxed on increases in value of assets such as shares, properties, and farms held in their super, even if those gains have not been realised through a sale.<\/p>\n\n\n\n
Franking credits, designed to prevent double taxation on company profits, will be caught up in the new regime. Randeria explained on Sky News\u2019 AM Agenda that franking credits are credited to a member\u2019s super account and form part of the net earnings. The new rules apply to these earnings\u2014including unrealised capital gains, cash income, and franking credits\u2014leading to what she described as a \u201ccharge on a tax refund,\u201d which she labelled \u201cappalling.\u201d<\/p>\n\n\n\n
Under the proposed changes, super fund members with balances above the threshold will face charges not only on realised income but also on the paper gains that have not yet been converted to cash. This includes franking credits, which are issued to ensure shareholders don\u2019t pay twice on dividends. Randeria criticised the policy as unfair, noting that it effectively penalises members by charging money they have not actually received.<\/p>\n\n\n\n
Franking credits were first introduced by the Paul Keating government and expanded under the Howard government to ensure that taxpayers who do not pay income tax could still receive refunds<\/a>. Labor\u2019s previous attempt to change the rules in 2019 contributed to electoral backlash and the party\u2019s defeat, highlighting the sensitivity around these settings.<\/p>\n\n\n\n Franking credits will be hit by Labor's proposed superannuation changes, which one accountant describes as a "tax on a tax refund". https:\/\/t.co\/3HhQuCv6tq<\/a><\/p>— Financial Review (@FinancialReview) May 29, 2025<\/a><\/blockquote>\n\n\n\n Economists and investors have voiced concerns about the potential impact of taxing unrealised gains, warning it could discourage risk-taking and investment. Geoff Wilson, founder of Wilson Asset Management<\/a>, highlighted the risk that investors might shift their money away from corporate Australia towards safer assets like family homes. He said this could reduce the capital available to startups and small-to-medium enterprises, which are crucial for economic growth.<\/p>\n\n\n\n Wilson described the proposed changes as a threat to \u201cthe lifeblood of Australia<\/strong>,\u201d cautioning that investment patterns could change significantly, leading to less support for innovation and business development across the country.<\/p>\n\n\n\nWarnings from Investment Experts<\/h2>\n\n\n\n