Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 306

Cuffelinks Firstlinks Edition 306

Welcome to the Firstlinks Newsletter Edition 306
Graham Hand

Graham Hand


We start our final election coverage with a reprise of Mark Ellem's article explaining the differences in investing and superannuation policies of the two major parties. Then we move on to fresh insights into Labor's proposals:

Colin Lewis explains why the extra contributions tax will impact more people than is commonly understood. Do you know how to calculate the cost?

Tony Dillon says members in pension phase should not assume the trustees of large funds will refund excess franking credits, and he quantifies the impact of the policy on capital gains tax.

Rodney Brown believes the loss of franking credit refunds may increase corporate tax evasion.

* Finally, we bring together seven strategies to manage the impact of the loss of franking credits.

(There are no new Coalition superannuation policies proposed in the election campaign).

Regardless of whether you are for or against the basic principle of Labor's franking policy, it's a strange outcome when wealthier people are not affected. Trustees with large, diversified SMSF portfolios where the amount in accumulation will always exceed the pension tranche can use the credits to pay tax. I also have a friend who is a tenured university academic with healthy retirement savings held by Unisuper. Their website says: "Based on our current understanding, we expect to continue to use franking credits to offset our income tax liability." 

These people, including myself, are unlikely to be adversely affected, yet Labor's motivation is 'fairness' and a move against 'the top end of town'. Meanwhile, a Centrelink pensioner who established an SMSF in the last year loses the franking refund. It's likely the policy will not survive in its current form in the face of Senate opposition. Expect a minimum allowed refund of say $5,000 to satisfy the cross-benchers, which will dent the number at the top of this list.  

 


When Cuffelinks surveyed its readers on franking credits, over half the 2,000 respondents said they would change investments or super structure if Labor's policy is adopted.

Implementation of these policies has major consequences for the budget as the revenues finance new spending on cancer treatments, child care, dental care and infrastructure. By 2030, franking credit refunds alone are worth $7 billion a year.

If it's correct that industry funds will not be affected, their power will multiply across all sectors. For example, within five years, AustralianSuper expects its funds under management to double to $300 billion, and it will bring more management in-house to reduce its costs.

Moving right along ...

If you're tired of the election coverage (and yes, franking credits), let's check some research on ways to drive better investment outcomes.

Jack Gray and Steven Hall describe 10 'rules of thumb' often used by professionals to help make decisions during uncertain times.

Shane Shepherd explores with David Laibson how investors make irrational decisions, and changing their environment can be more effective than changing their behaviour.

Michael Collins looks at the ethical issues of Artificial Intelligence, or AI. We're only just starting to appreciate the consequences while AI is off and running. We're all being watched.

This week's White Paper below is a review of global ETFs from BetaShares, showing good growth while 'mutual funds' face outflows, and the rising popularity of fixed income ETFs. In Australia, the sector is close to $50 billion, a doubling in only two-and-a-half years.

The 'Additional features' section below carries a wide range of reports on hybrids, ETFs and LICs.

Congratulations to Sydney-based Andy Kuper of Leapfrog Investments, who recently closed the largest ever private equity fund by a dedicated impact fund manager. The $1 billion raising will invest in healthcare and financial services to reach 230 million people in emerging markets.

Graham Hand, Managing Editor

 

For a PDF version of this week’s newsletter articles, click here.

 


 

Leave a Comment:

banner

Most viewed in recent weeks

UniSuper’s boss flags a potential correction ahead

The CIO of Australia’s fourth largest super fund by assets, John Pearce, suggests the odds favour a flat year for markets, with the possibility of a correction of 10% or more. However, he’ll use any dip as a buying opportunity.

16 ASX stocks to buy and hold forever, updated

This time last year, I highlighted 16 ASX stocks that investors could own indefinitely. One year on, I look at whether there should be any changes to the list of stocks as well as which companies are worth buying now. 

Retirement is a risky business for most people

While encouraging people to draw down on their accumulated wealth in retirement might be good public policy, several million retirees disagree because they are purposefully conserving that capital. It’s time for a different approach.

Is Gen X ready for retirement?

With the arrival of the new year, the first members of ‘Generation X’ turned 60, marking the start of the MTV generation’s collective journey towards retirement. Are Gen Xers and our retirement system ready for the transition?

Reform overdue for family home CGT exemption

The capital gains tax main residence exemption is no longer 'fit for purpose', due to its inequities, inefficiency, and complexity. Here are several suggestions for adapting or curtailing the concession.

So, we are not spending our super balances. So what!

A Grattan Institute report suggests lifetime annuities as a solution to people not spending their super balances. The issue is whether underspending is the real problem or a sign of more fundamental failings in our retirement system.

Latest Updates

Shares

16 ASX stocks to buy and hold forever, updated

This time last year, I highlighted 16 ASX stocks that investors could own indefinitely. One year on, I look at whether there should be any changes to the list of stocks as well as which companies are worth buying now. 

Superannuation

2025-26 super thresholds – key changes and implications

The ABS recently released figures which are used to determine key superannuation rates and thresholds that will apply from 1 July 2025. This outlines the rates and thresholds that are changing and those that aren’t.  

Shares

The naysayers may be wrong again on the Big Four banks

While much of the investment industry recommends selling the banks, many were saying the same thing 12 months ago. The reporting season shows why bank shareholders should be rewarded for ignoring the current market noise.

Superannuation

Unpacking investment risk in superannuation

Understanding investment risk in superannuation is crucial for your retirement account. Here's a guide on how to define, take, and manage risk to select the right investment mix tailored to your unique circumstances.

Economy

This 'forgotten' inflation indicator signals better times ahead

Money supply provides an early and good read on whether the cash rate setting is transmitting to accelerating, steady or slowing price pressures. This explores recent data on money supply and what lies ahead for inflation.  

Investment strategies

The biggest and most ignored catalyst for emerging market stocks

Relative valuations and superior GDP growth alone are not compelling enough reasons for an improvement in emerging market equity returns. Earnings growth looks more likely to revive the asset class’s strong long-term record.

Property

Has Australian commercial property bottomed?

Commercial property took a beating in recent years as markets adjusted to higher interest rates. From here, strong demand tailwinds and a sharp fall in fresh supply could support solid returns for the best assets.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.