In March last year – the Labor Party announced that on the 01 July 2019 if elected it would stop rebating excess franking credits to investors.
There is a good chance Labor may get into power at the next election. However, there is no guarantee it will occur and they will then have to get legislation through the upper house and that will be no mean feat. Needless to say hitting the panic button would be futile. Let’s be pragmatic and make sure that we are not adversely affected. So in March last year when it was announced Prime started to reduce the exposure in our recommended portfolios to franked income, which is really a continuation of a theme we have held for over the last 5 years – which is to encourage our investors into a wider asset allocation and consider options offshore and unfranked income streams.
Importantly as we look ahead – some people still felt that they are going to see a reduction in their income. Whilst we hear these concerns like the old saying goes “You are not a tree….move.”
What I mean by this statement is that there are ways, avenues and opportunities that are available to offset this risk.
Who’s impacted:
Who’s not
The culmination of changing Australian retirement portfolio construction
All of this severely undermined the Australian franked income investment strategy.
A change in Federal Government will likely be the final catalyst to force domestic retirement investors to consider diversification of portfolio’s beyond Australian franked income.
Portfolios will be constructed completely differently to today for several reasons:
Investors will have to work even harder in their portfolio construction
> set and forget is no longer viable
Australian old-economy, blue-chip equity will likely de-rate.
Investors will rapidly seek out alternatives to Australian shares and hybrid securities > international shares and small-cap shares will see ongoing, deserved growth > mortgage funds and alternative income sources will proliferate.
Be rational, be practical >
Investors need to broaden their investment horizon, to incorporate not just income, but capital growth as well
You have options!
Let me be very clear, we are here to help and would love to in any way. While this might feel like a “kick in the teeth” now, I think a move away from a franked income as a strategy is a good thing. Understand that you do have options and there is a silver lining to this: moving away from franked income strategy in years ahead will be a far greater and more positive impact for portfolio returns than many people expect.
If you feel this article has been helpful please pass it on to others that you feel may be impacted and if you yourself would like to discuss your portfolio – I can be reached on the details below:
Michael Cooper
Listen to what one of our clients have to say. Here’s Brett & Megs sharing their positive experience with us:
To listen to a message from Michael, watch the video below:
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