• Avita Medical's share price has been quite a ride over the past two years, but we still think it's a quality company. Here's why

The economics of a change in government


The economics of a change in government

Over the coming months, Australian citizens over the age of 18 will be required to vote to elect members of the 46th Parliament of Australia. As always, there is a chance of a change in government. Indeed, this time around, that chance appears meaningful.


subscribe for free
or sign in to access the article

Andrew Macken is the Chief Investment Officer of the Montaka funds and the Montgomery Global funds. He established MGIM in 2015 in partnership with Montgomery.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

Why every investor should read Roger’s book VALUE.ABLE


find out more



  1. Andrew, I don’t think there is a valid argument for government stimulus, in fact what we badly need is a recession and globally, sorry to spoil the party and for saying it like it is, but we have had way to much stimulus already, that is why %14 of companies globally are in the Zombie category and this is after 10 years of emergency level interest rates, the real number would be closer to %50 if we had normalised interest rates, we need to flush the toilet and get rid of the poo, so we can grow again, we have far to much lousy capital allocation after these 10 years, if your economy is full of zombies how do you expect it to grow? It can’t, if you keep stimulating you only perpetuate the birth of more zombies, that equals less growth.
    The stupid property bubble is a classic example of very bad capital allocation, caused by cheap money or stimulus, a lot of that bad capital investment will be destroyed over the coming years, its a no brainer and it should be by now after 10 years of total failure. You just can’t print prosperity.

  2. My understanding of labor’s argument is when you do you’re tax return all income is declared, and deductions produced, and if those deductions are such that it reduces your’e tax liability beyond zero, then bad luck, you don’t get a cheque in the mail for any difference, I believe this franking credit is only in Australia, designed to work towards self funded retirements presumably in the long run to aid in reducing government spending. If you manage to reduce your’e cost of living by limiting how much tax you pay, legally, well and good, but labor says zero tax should be the limit anything beyond, the rest of the tax payers shouldn’t pay you a credit, instead the money is spent on schools, hospitals etc…
    Unless I am mistaken this is akin to negative gearing, there comes a point where you have too many properties that you’re deductions reduce your’e tax liability to zero, after which you receive no tax benefit, you don’t get a credit for anything beyond, like a franking credit. Although labor wants to abolish negative gearing altogether.
    The argument against is retirement’s have been planned specifically around the franking rule, particularly self funded, reducing the burden on government spending, it would be unfair to reverse and penalise.

  3. I can’t believe just how many people are missing the point. The franking credits issue is not about retirees or boomers versus Gen X, or X versus Y, it is about ANYONE of ANY AGE who has a super fund because guess what ? Your super fund pays tax at 15%.

    Therefore, even if you are on the very top MTR, you still get a benefit from franking credits from the difference in tax rates between you and your fund. It’s very simple, but people are clouding the issue, talking about ‘self funded retirees’, which essentially, Gen X and anyone after them will HAVE to be, because there won’t be a pension. If there is, it’ll probably be so little you won’t want it anyway and you’ll have to meet a ridiculous assets test to qualify, e.g. “your house is worth a million…you’re a millionaire, can’t you sell it and live somewhere else that’s cheaper ? Computer says ‘no’ unless you do”. You might laugh, but mark my words, it will happen because there’s not enough money to support everyone on the pension and it will get harder to get and be less, so as not to be attractive. The pension was intended as a safety net for destitute people, not as a retirement plan, but people see it as an entitlement because “I paid taxes all my life”, but remain silent when asked “Did you use roads, schools, hospitals, libraries, police etc. ?”.

    The only people the removal of franking credits would not affect would be those on 15% tax MTR because regardless of holding shares in or outside super, they’d see no difference. But those people on that tax rate, are they really likely to hold shares if they earn so little money ? Doubtful, unless they were held by a non-working spouse.

  4. Subject: Franking credits – Labor’s Regressive Tax changes – the more you earn the less you lose

    Have you read the recent Chris Bowen press release CUTTING FRANKING REFUNDS IS A STEP TOWARDS FAIRNESS that is available on his website.

    Bowen has very cleverly crafted statements which mask the real unfairness of Labor’s plan. He labels every retiree who doesn’t get the pension as ‘rich’.

    He does not address the fact that both for the individual tax payer and for the SMSF member these changes are ‘regressive’ tax measures. Those at the bottom lose a higher percentage of their annual living income. i.e. the more you earn the less you lose.

    Bowen continues his claim that ‘no tax is paid’ – completely ignoring that tax was paid by the company and is added back on (grossed-up) by the individual when declaring the income;

    For example under current legislation – A person receives say a $700 dividend on their shares. The shares come with a 30% tax paid (franking credit). Money received is $700 but Taxable Income declared is $1,000. When the person lodges their tax return, the dividend is ‘grossed up’. The individual declares that they have received $1,000 dividend income ($700 + $300 credit = $1,000).

    Currently, the Tax Office records the $1,000 as taxable income and allows for tax paid of $300. If the person is under the Tax Free Threshold then the $300 is refunded by the Tax Office. So, by removing the refund Labor’s plan removes the retirees Tax Free Threshold hitting those at the bottom of the ‘rich list’.
    Very few people in the media, even respected journalists, understand the concept of the ‘gross up’. If only people could grasp that concept they would understand the big fallacy in Chris Bowen’s argument when he says that we “can’t give refunds to shareholders who haven’t paid tax in the first place’.

  5. What about the possiblility of a labor government but an even larger part of the senate held by minor parties making it difficult to pass major changes? Have you thought this could look like? Could retirees keep their franking credit refunds?

Post your comments