Anthony Albanese's government warned latest proposal could be seen as a 'tax ... trends now
Treasury has admitted the Albanese government's proposed crackdown on franking credits could be seen as a tax hike by stealth in a particularly touchy area for Labor already battling accusations they are breaking electoral promises.
The government introduced a bill last month into parliament that seeks to restrict the ability of companies to distribute franking credits to shareholders as part of an off-market share buyback or capital raising.
Franking credits prevent shareholders from being taxed twice. They offset the amount of tax a share investor pays because the dividends they receive come out of profits, which have already been taxed at the 30 per cent company rate.
The new measures, which will reap $600million, attracted overwhelmingly negative public feedback labelling them a tax increase or 'winding back' of franking credits, according to documents released under Freedom of Information to the opposition.
In talking points for Treasury officials appearing before Senate estimates hearings following the October budget the department admitted 'there were significant concerns raised by the public' in around 2000 submissions.
'Concerns were raised over retrospectivity, policy objective and potential for the legislation as drafted to capture legitimate commercial practices,' the documents say.
'Treasury is considering the issues raised.'
Treasury went on to say that shareholders benefitting from credits attached to off-market could argue the new policy 'is effectively a tax increase or a winding back of dividend imputation'.
Labor's proposals treat off-market share buybacks the same way as on-market buy-backs, which would net the budget $550m a year.
On-market buybacks are when a company buys its shares through an exchange, such as the ASX, whereas off-market buybacks are when a company will offer to buy shares back directly from the shareholder.
Labor's proposals would most potentially affect those living off investment income who are often over 75, superannuation funds and charities.
Anthony Albanese's (pictured with partner Jodie Haydon) government has been accused of breaking another election promise with major changes to franking credits set to be announced
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