NFPs To Be Caught in Super Tax Fallout
24 June 2010 at 11:55 am
The Federal Government's proposed Resources Super Profits Tax on Australia's mining industry could cost Not for Profits up to $10 million dollars annually in lost investment funds, according to fund management experts.
Australian fund managers, Private Portfolio Managers (PPM) says that amongst all the commentary regarding the proposed Resources Super Profits Tax, the effect on superannuation funds and Not for Profit organisations seems to have been overlooked.
The Head or PPM Corporate Development, Kris Vogelsong says that under the proposed tax scheme, resource companies like BHP and Rio Tinto would pay an additional tax equivalent to 40% of their 'super' profits, but the new tax will not earn imputation credits that could be reclaimed by super funds and tax exempt organisations, that own shares in resources companies.
Vogelsong says the result will be a transfer of wealth to the Government and Self Managed Super Funds, public offer superannuation products, industry funds, foundations, charities, Private Ancillary Funds and Australian NGOs are all potentially effected.
Under the current imputation system, these entities can claim back tax paid by the companies held in their investment portfolios, however, the RSPT will not create franking credits, reducing the income that can be distributed directly or recouped through the imputation system.
He says for charities, there is nothing in the proposed tax reform package to help offset the wealth transfer to the Government and the losses could be as high as $10 million dollars annually.
He says as an investment manager who manages funds for charitable organisations, he's disheartened by the effect of the RSPT on Not for profit organisations who contribute so significantly to the social and cultural substance of Australia.
He says it is safe to assume that the implications for the charity sector were not fully understood and have certainly escaped consideration.
Vogelsong says the Federal Government could resolve the franking credits issue by considering some form of compensation for the Not for Profit sector.