Money matters!

Just what is an Imputation Credit Potential Windfall?

I was bemused coming into the last federal election, over claims that only 200,000 pensioners would be impacted throughout Australia if the cash refund of imputation credits was scrapped.

To me, it just indicated how many Australian’s are not claiming that refund.

What’s this imputation credit refund entitlement that caused a massive back lash leading into the last election?

Way back in the olden days before “the recession we had to had”, Mr Keating gave a very fair gift to the Australian tax payer, when he reasoned that if Australian companies were paying tax on their profits before a dividend was paid to share holders, and if the Australian Tax Office then taxed that dividend when the share holder lodged their tax return, then the  Australian Government was receiving tax on that profit twice.

So, Mr Keating allowed what is called an Imputation Credit, which is basically the amount of tax already paid on that dividend, to be offset against the tax due, when the shareholder lodged their tax return. 

That worked beautifully, until some years later when the Treasurer at that time, Peter Costello, allowed a cash refund to tax payers who had Imputation Credits, that exceeded their tax bill or people who didn’t pay tax, such as pensioners.

Spend Your Refund!

It gave me great joy last year, when a pensioner gathered up her IAG, AMP, NIB shares, all of which she received because of membership in those organisations, and saw a friendly tax agent to lodge claims going back 10 years, which then allowed her to replace her broken down refrigerator from the refund!

Last month, a client told me that she claimed the refund on their shares but didn’t realise that there were credits on their joint managed investment, so that entitled them to a further $900 for the past three financial years.

If you are lodging full tax returns, your taxation agent or accountant, takes care of the Imputation Credit rebate process but if not, claiming through the “Refund of Imputation Credit” form is not a difficult exercise. 

So readers, make the effort but if unable to manage the claim yourself, gather up your dividend advices and call on a local taxation agent for assistance.

For many retirees who are on low income, this refund can be a massive help.

Estate Planning

When shares are in one name, changing shares to joint names when the partner is to receive those shares upon death, can make it much easier and may avoid the cost of probate, should the share-holder pre-decease their partner. 

This is also not that difficult to achieve and most of the online trading providers’ consultants can assist. 

A staged process to change ownership over multiple tax years may be an option if capital gains is a consideration which an accountant, taxation agent or adviser can clarify.

They will need to know the amount the shares cost or the value when acquired if this occurred after 19/9/1985 which is when Capital Gains Tax became a reality. 

Check it out! Ask advice. 

Alan Tickle. 

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