If you find letter-writing campaigns tedious and boring and ultimately useless, like me – by which I mean I find them useless, too, not that I am useless … oh, never mind – then here’s something you might feel you can get your teeth into.

It’s not a campaign to save the whales. It’s not a campaign to stop people wearing fur. It’s not a campaign to release bears from lives of barbaric captivity. It’s not even a campaign to get a Gold Logie for Rove.

It’s a campaign to save our dividends – SODS, as I’ve dubbed it.

Think it’s some kind of joke? I did, too, until I heard Paul Keating talking about it.

Love him or hate him, at least you’ll never die wondering what Keating thinks. And he thinks that the so-called Henry Review of taxation (“Australia’s Future Tax System”, to give it its full title) is a clear and present danger to the dividends paid by Australia’s listed companies – to dividend imputation, specifically.

To briefly recap for those who weren’t paying attention in class, dividend imputation is a system for avoiding the double-taxation of company profits. A company earns a profit, pays tax, and then pays a dividend. Australian shareholders receive the dividend and get a credit for the tax paid by the company. It works so that the maximum amount of tax payable by an Australian investor on a dividend paid by an Australian tax-paying company is the investor’s own marginal tax rate.

In the context of a review of Australia’s taxation system, there are mutterings about abolishing dividend imputation, so non-resident investors will be put on the same tax footing as Australian investors. And Keating’s having none of it.

He acknowledges that dividend imputation is on the table for review because every aspect of the tax system is on the table. But he’s been around a while, he knows how these things work, and when he says, “If it’s on the table, it’s there to be knocked off”, he knows whereof he speaks.

The consequences don’t bear thinking about. For example, even though Australian super funds pay tax at a notional rate of 15 per cent, thanks to dividend imputation – and solely to dividend imputation, apparently – the average actual tax rate paid by super funds is a smidgin over 5 per cent.

Removing dividend imputation would immediately see the tax paid by super funds leap, and that in turn would likely prompt a whole round of reviews of the tax paid on contributions and earnings to compensate.

This affects almost every Australian adult, because almost every Australian adult has money in a super fund.

If you feel strongly enough about this assault on an Australian financial icon – or feel strongly enough about it on behalf of your clients – than an appropriately- worded communiqué to the tax review might not be a bad idea.

Sharpen those quills. You have until May 1:

AFTS Secretariat

The Treasury

Langton Crescent


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