Franking credit war

Investment giant’s warning on shareholders

THE nation’s biggest listed investment company says the overwhelming bulk of its shareholders will be worse off under federal Labor’s planned elimination of excess franking credits.

The Australian Foundation Investment Company said a survey of its shareholders found 85 per cent of respondents had declared they will be negatively impacted by the proposed changes.

The $7.2 billion investment giant is increasing its lobbying against the measure, holding a series of information meetings across the country.

AFIC, which has more than 130,000 shareholders, said it was also looking at further strategies to try to influence policymakers on the issue.

A survey of AFIC’s investors received 14,362 replies.

Seventy-nine per cent of respondents were retired or approaching retirement.

AFIC managing director Mark Freeman said many shareholders were distressed and believed it would be difficult to find new sources of income to replace the franking credit refunds if the current policy changed.

“Our survey reveals that many use or intend to use franking credits to maintain a modest quality of life in retirement,” Mr Freeman said.

“Respondents call out using franking credits to buy groceries and pay for medical expenses. In this context, it would be very disappointing to see this retirement income stream taken away from them.”

Last year, Opposition Leader Bill Shorten unveiled a policy to claw back almost $60 billion over 10 years by abolishing cash refunds for excess dividend imputation credits. Shadow treasurer Chris Bowen has defended the policy against complaints by investment groups and retirees.

Listed investors such as AFIC have already acted to protect the value of franking credits, passing them to shareholders in the recent reporting season ahead of possible changes.

In January AFIC began to re-engineer its portfolio by dumping almost half its stake in Rio Tinto and selling down shares in BHP to defend the value of franking credits ahead of any change of government.

AFIC said it would immediately distribute much of those funds from the twin selldowns to its own shareholders, declaring a special dividend of 8c.