SuperConcepts executive manager of technical and strategic services Phil La Greca said that, in the lead-up to the federal election, there were policy proposals from Labor being acted upon as though they were a done deal.
“There was a lot of commentary around preparing for a Labor victory, particularly with the franking credit proposal, and it led to a range of behaviours that must serve as a lesson for understanding the realities of the legislative process,” Mr La Greca said.
Mr La Greca said that some investors were selling down assets and rolling money out in preparation for a Labor victory simply because it was in a press release and backed by polls, which have become increasingly less reliable of election outcomes.
“We saw banks and other large companies announcing additional dividends before June 30 to soak up the lost franking credit refund that they wrongly assumed would happen with a Labor victory,” he said.
“While these would all appear to have been prudent actions, they were predicated on a range of outcomes, namely the election of Labor, then the drafting of a bill to reflect the proposal, then passing of the bill through both houses of parliament in its originally stated form.”
The lesson from this election campaign, he said, is that while it may be prudent for advisers and trustees to plan around policy proposals, they shouldn’t act until there is more certainty around the final shape of the legislation, which can be a long way from the original proposal.
“Advisers and investors who took action or advised clients along these lines are now learning a tough lesson that a press release during an election campaign is not the same as legislation,” he said.
Advice firms gave similar warnings in the lead-up to the election, with GEM Capital adviser Mark Draper warning SMSFs not to overact to the policy, with the ability for Labor to pass it as legislation, even if it did win the election, very uncertain.
“What’s said in the lead-up to an election is not necessarily what gets legislated, and they’ve firstly got to win the election, and whilst they’re favourite, it will still be a fair election for them to lose, so I wouldn’t be making changes right now based on what they’ve promised,” Mr Draper told SMSF Adviser previously.
Hewison Private Wealth director Chris Morcom likewise told SMSFs to hold off making significant portfolio changes.
“There’s no point in making any changes right now until that whole process is worked through, and that could take quite a lot of time,” he said in the lead-up to the election.
But the banks and miners were wise to do what they did and the voters were equally wise to kneecap the franking credit refund cancellation proposal inter alia. It’s good to see tax is toxic for politicians again.