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16 July 2025 by Maja Garaca Djurdjevic

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Imputation debate heats up

  •  
By Alice Uribe
  •  
5 minute read

Industry stakeholders feel the imputation system is on shaky ground as the Henry tax review continues, despite Treasurer Wayne Swan offering some support.

Vigorous debate often characterises the superannuation industry. However, the potential removal of the dividend imputation system following the federal government's Henry tax review seems to have united friend and foe.

In fact, the issue seems to have incited passions within the financial services inudstry.

In a recent Australian Financial Review article, journalist Barrie Dunstan wrote that Investment and Financial Services Association chief executive Richard Gilbert "sparked to life" when talk turned to the question of imputation and franking credits.

Gilbert said in the interview that any changes to the system emerging out of the Henry tax review could be very damaging, not only to investors and the $1.1 trillion superannuation industry, but to the Australian Securities Exchange.

 
 

The Association of Superannuation Funds of Australia (ASFA) has also been vocal.

"Abolishing imputation credit tax provisions is not a desirable outcome for the superannuation sector or members of funds - especially in a time where adequacy of retirement benefits is under pressure," ASFA chief executive Pauline Vamos said.

According to Vamos, the removal of the dividend imputation system, which was introduced in 1988 by then treasurer Paul Keating, had the potential to lower the company tax rate and make Australia attractive to overseas investors due to a reduction in taxes.

However, this may also raise the bill for all investors, including superannuation fund members.

"This would be yet another blow to beleaguered self-funded and partially self-funded retires," Vamos said.

ASFA also said it was likely the abolition of the imputation system would have a dramatic downward effect on Australian share prices.

In February, Treasury secretary and tax review chair Ken Henry said that while he was not advocating "doing away" with imputation, the system was not consistent with the increasing globalisation of business.

According to The Australian newspaper's economics correspondent, David Uren, Treasurer Wayne Swan had also put the possible removal firmly on the agenda.

"One of the questions facing our taxation review and one we must all engage with is the competitiveness of Australia's statutory tax rate," Swan said.

However, just last week Swan seemed to provide some support for the imputation system.
 
"I personally think dividend imputation has delivered an enormous benefit to the Australian economy," he told journalists.

"I'm somewhat puzzled by the continued reports that there is some threat to dividend imputation. It, like all other issues in the tax system, is being reviewed by Dr Henry in his review. But from my perspective it's played a very important role in our economy and I think it's a very worthwhile initiative."

Many in the industry remain unconvinced the system is safe.

At a recent ASFA luncheon, Vamos said she had sent 20 letters to lobby the government on this issue.

"What we need from government is a stable and supportive tax and regulatory environment for Australian investments and to drive real benefits for the incomes of Australian workers. Dividend imputation forms an important part of this and should be maintained," she said.

Gilbert told the Australian Financial Review: "This is a confidence game.

"We are just getting our breath back in the markets and this could be disastrous for confidence."