Why Friday could be D-day for ASX dividend shares and franking credits

Investors have until Friday to voice their support or opposition to proposed tax changes relating to franking credits.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points
  • Fund manager Geoff Wilson has implored investors to oppose proposed tax changes affecting ASX dividend shares and franking arrangements
  • Investors have until Friday to submit their opinion on proposed changes relating to off-market share buybacks
  • Wilson Asset Management has offered shareholders a template to use for their submissions 

Veteran fund manager Geoff Wilson, the chair of Wilson Asset Management, has made a final plea to investors imploring them to oppose proposed tax changes affecting ASX dividend shares and franking arrangements.

Earlier this year, the federal Labor government proposed legislation that would stop companies from paying franked special dividends funded via capital raisings.

The legislation also seeks to stop companies from paying fully franked dividends to participating shareholders as part of an off-market share buyback.

The legislation has been open for public comment in recent months.

Submissions regarding the capital raisings and franking component of the legislation closed on 5 October. Submissions regarding the off-market share buybacks component close this Friday.

Wilson has vehemently opposed the changes, saying the cost could 'could run into the billions'.

A group of people in business attire gather around a computer in an office environment with expressions of concern as they try to nut out the answer to a challenge they are facing.

Image source: Getty Images

What did Wilson say to shareholders?

In a letter to shareholders of his listed management companies (LICs) yesterday, Wilson said the proposed new rules carry "significant unintended consequences".

He encouraged investors to submit their views to the federal treasury department.

He even offered them a template to use if they can't find their own words. It contains some of the fund manager's key points of disagreement.

The template states the proposed changes to franking credits "undermine a system that has supported Australian companies and investors through more than three decades of economic stability and growth".

It says the system "has encouraged Australian companies to invest in and pay corporate tax in Australia and emboldened Australians to invest locally".

Changes could see franking 'dismantled beyond repair'

Wilson said the changes were "poorly constructed" and he wanted to work with the government:

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.

We are currently preparing our submission, which we look forward to sharing with you when it is complete.

Shareholders were given a link to Wilson Asset Management's submission regarding the proposed changes to franking credits and capital raisings.

Why is the government doing this?

The Federal Treasurer, Jim Chalmers, reckons the new rules are "a very minor measure".

He says it simply closes a loophole used by companies to pay out excess franking credits on their books.

The central argument is that franking credits should only apply to dividends from realised profits.

The S&P/ASX All Ordinaries Index (ASX: XAO) closed down 0.86% on Wednesday.

The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ASX Share Market News

Man sits smiling at a computer showing graphs.
Exchange-Traded Funds (ETFs)

IonQ just posted record revenue. What does it mean for the ASX's newest quantum computing ETF?

A record quarter, a brand new fund, and one big catch.

Read more »

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a lukewarm end to a stunning trading week today.

Read more »

A white EV car and an electric vehicle pump with green highlighted swirls representing ASX lithium shares
Broker Notes

Here's what brokers tip for PLS shares over the next 12 months

PLS shares ripped 275% in FY26. Here are 6 new 12-month share price targets from the experts.

Read more »

Happy friends holding shopping bags in a shopping mall.
Broker Notes

Buy, hold, sell: Myer, Centuria Office REIT, Viva Energy shares

Analysts reveal their ratings and 12-month share price targets.

Read more »

Three trophies in declining sizes with a red curtain backdrop.
ASX Share Market News

3 ASX 200 stocks storming higher this week on big news

These three ASX 200 stocks surged 17% to 23% this week following big announcements.

Read more »

A young woman holds her hand to her ear and leans sideways as if to listen to something that's surprising her as her eyes and her mouth are wide open.
ASX Share Market News

Why James Hardie, Avita Medical and ResMed shares are turning heads on Friday

Why is everyone talking about Avita Medical, ResMed, and James Hardie shares today?

Read more »

Animation of a man measuring a percentage sign, symbolising rising interest rates.
ASX Share Market News

Will they hold, or won't they? What experts are saying about Tuesday's RBA interest rate meeting

Leading experts sound off on what to expect at next week’s RBA interest meeting.

Read more »

Woman using mobile phone for digital banking, with hologram of globe and different currency symbols.
ASX Share Market News

Why this international market could be a "hidden giant" – Expert

This market could be set for takeoff.

Read more »