Dick Smith didn’t want $500k tax return
Australian businessman Dick Smith has thrust franking credits back into the national debate after claiming his $500,000 return under the scheme is an "outrageous" waste of taxpayers money.
The Bill Shorten-led Opposition had promised to abolish the cash refund if it won the May federal election and the Labor Party is still weighing up its position on the policy in the wake of the loss.
Mr Smith told The Sydney Morning Herald he had no idea what franking credits were when he received $500,000 under the scheme in 2016/17 and about $250,000 in 2017/18.
The millionaire, who rose to fame through his electronics stores and range of grocery products, said he complained to the Australian Tax Office once he learned of the payments.
"I found I was getting this ridiculous money from the government," Mr Smith told the publication.
"That's wrong, I said - I'm wealthy. My accountant said 'that's how it works, that's what you have to do'. I can't stop it. I think it's outrageous for wealthy people to be getting money from the government."
He suggested a means test should be applied to the scheme to allow more wealthy Australians to be denied franking credits.
"Labor sold the whole thing incompetently," Mr Smith told the SMH on Tuesday. "They should have put a threshold on it, so wealthy people like me would pay the tax, but pensioners and less well-off people would not meet that threshold."
The controversial tax system went from relative obscurity to a heated point of discussion after the Scott Morrison led Coalition labelled the Opposition's plan on the policy a "retiree tax".
Google searches for the term "franking credits" in Australia were flat in January this year - only to spike dramatically in May when it suddenly became a hot topic.
If you're a shareholder, you get paid a dividend when the company makes a profit - and normally you would have to pay tax on that, just like you would with your regular wages.
But in 1987, then-treasurer Paul Keating introduced "dividend imputation credits" - also known as "franking credits" - which was designed to prevent double taxation.
Basically, it recognised the government already taxed companies' profits, so it wasn't fair to then tax an individual a second time.
So shareholders were given a sort of "I owe you" - they were able to deduct the amount the company had already paid in tax off their own taxable income.
But then in 2001, Peter Costello took it one step further and changed the rules to allow that tax deduction to be swapped for a cash refund.
It meant that even shareholders who didn't pay tax - like retirees - could still be given a cash refund from the ATO.
Dick Smith thinks Labor failed to sell franking credits policy. Perhaps he could have spoken up in support of it during the election? I had no trouble understanding the policy, and LNP scaremongering and false info and hyperbole are the real culprits. And msm, who didnt help.— 💧Jackie (@jaquix173) July 17, 2019
A tinge of guilt from Dick Smith !— Mary Eiffert (@MEiffert54) July 17, 2019
BFD to late mate! where was Dick 3 months ago when this debate about Franking credits was raging?#Australia
So, the “quiet Australians” are slowly getting loud. A bit late Dick Smith! A bit late!— ramona quazzola (@r_quazzy) July 17, 2019
Mr Smith's comments caused a stir online with many questioning why the outspoken millionaire didn't voice his position on the scheme during the election campaign.
"Dick Smith thinks Labor failed to sell franking credits policy. Perhaps he could have spoken up in support of it during the election," said Twitter user.
"Where was Dick three months ago when this debate about franking credits was raging," said another.
"So, the 'quiet Australians' are slowly getting loud," tweeted another. "A bit late Dick Smith, A bit late."