‘It’s ridiculous – I’m wealthy’: Multi-millionaire businessman Dick Smith demands the Australian Tax Office take back the $500,000 it gave him
- Millionaire philanthropist Dick Smith received $500,000 in franking credits
- The electronics chain founder has called the scheme outrageous and wrong
- Franking credits is a scheme that offers cash rebates to some shareholders
Millionaire philanthropist Dick Smith has made the outrageous complaint that he has received too much money back from the government.
The electronics chain founder and Sydney businessman received $500,000 in franking credits from the government in a year – a sum he said was outrageous.
‘I found I was getting this ridiculous money from the government,’ he told The Age.
‘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.’
Millionaire philanthropist Dick Smith has made the outrageous complaint that he has received too much money back from the government
Franking credits is a controversial scheme that offers cash rebates to some Australian shareholders at tax time.
The credits are given to people whose share dividends have already been subjected to company tax and can be used to reduce an individual’s basic tax liability, so they aren’t taxed twice for the funds.
SO WHAT ARE FRANKING CREDITS?
Companies have already paid tax on their profits when they hand them out to shareholders as dividends.
Dividends are then distributed to shareholders ‘fully franked’, with a ‘franking credit’ applying.
At tax time, shareholders get the value of the franking credit as a tax refund.
That means they don’t pay tax on profits, because a company has already paid tax. This stops ‘double taxation’.
Labor wanted to abolish franking credits for people who did not already earn income tax, describing it as a ‘gift’.
They can also be paid as a cash refund when someone’s total credits exceed the tax they owe.
In the 2016-17 financial year the Sydney businessman was paid $500,000 in franking credits. He received about $250,000 the following year.
He went to the ATO demanding he pay more in tax – a request that left commissioner Chris Jordan perplexed.
‘It’s not every day I get such a request – in fact I can’t think of any day I have been asked that question,’ Mr Jordan said.
The measure costs the federal budget about $5 billion a year and is deemed by Labor to be ‘unfair revenue leakage’.
Experts claimed Labor’s plans to scrap the controversial measure contributed to the party’s defeat in this year’s election.
Mr Smith said Labor was incompetent in how it sold the plan. He said a means test should have been added to it so pensioners were excluded.
Labor remains undecided on whether it will keeps its policy, ‘grandfather’ it or cap it.
A $5000 to $10,000 cap would exempt many shareholders, whereas grandfathering the scheme would see those already receiving benefits to continue doing so, whereas future retirees would be blocked.
Franking credits is a controversial scheme that offers cash rebates to some Australian shareholders at tax time