‘Dividend imputation system is in jeopardy’, says Geoff Wilson

In a letter to shareholders, Wilson Asset Management chairman Geoff Wilson said that the government’s proposed changes to the franking credits system and off-market share buybacks will “significantly impact Australian companies and investors”.

“Our dividend imputation system is in jeopardy with a two-pronged policy attack that will weaken the franking system by limiting the ability of companies to distribute franked dividends to shareholders,” Mr Wilson said.

“The changes being proposed to restrict a company’s ability to undertake an off-market share buyback with a fully franked dividend component and pay franked dividends to their shareholders, where in Treasury’s view, are directly or indirectly funded by capital raisings. 

“We believe this will significantly impact Australian companies and investors.”

Submissions on the bill are open until Friday, 9 December, with Mr Wilson also urging investors to share their concerns by submitting a letter to their local member of parliament.

“We are determined that all voices are heard and we will continue to advocate for retail shareholders and companies who are set to be impacted by these poorly constructed proposed legislation changes that have significant unintended consequences,” he said.

“We are eager to work with the current government on behalf of our shareholders to prevent the unintended consequences of these changes to the Australian franking system before it, and its enormous benefits, are dismantled piece by piece beyond repair.”

Mr Wilson, who was also a vocal opponent of the franking credit changes proposed by Labor in the lead-up to the 2019 election, previously encouraged shareholders to submit to the consultation in November.

“Surprisingly, this is their second attempt since the election to undermine the franking credit system, following a recent draft legislation from Treasury, still under review, which looks to stop companies [from] distributing fully franked dividends that are associated with capital raisings,” he said.

In an address to the Institute of Public Accountants last month, Minister for Financial Services Stephen Jones waived off criticism that Labor’s policy was about changing franking credits.

“Ordinary mum and dad investors will continue to receive their franked dividends,” said Mr Jones.

“Our change is only to align the tax treatment of on‑market and off‑market trades. That is fair and as it should be.”

He added that the measure not only “strengthens the integrity of our system”, but “it ends an unintended incentive for corporates to buy back shares off-market instead of on‑market”.