So Labor wants to rob all Australian taxpayers of their franking credit refunds. What a pity that Australian companies haven't already been maximising those refunds by paying out ALL their after-tax profits as dividends.
Instead, they're paying out just a fraction of their after-tax profits as dividends and allow those wonderful franking credits go to waste. Are they already doing Labor's bidding?
Of course, they keep telling us that they need to retain capital in order to expand but they could still retain those profits AND pass on those franking credits to shareholders by encouraging dividend reinvestment.
Let's say a company made a $100 before-tax profit (or what a friend calls money that slipped through the directors' fingers before spending it on themselves) on which it pays $30 tax. Rather than paying all its after-tax profit as dividends, it retains the $70 as additional capital. The shareholders lose out on both dividends and franking credit.
If the same company 'paid out' all its after-tax profits under a dividend reinvestment plan, it would still retain the $70 as new capital but the shareholders would also get additional shares (which they could sell later) AND those $30 in franking credits which otherwise would be lost.
Perhaps at the next AGM of the company you hold shares in, you could ask the directors why they don't 'pay out' all their after-tax profits under a dividend reinvestment plan so as to really put the boot into Labor.
