THE much-voiced concern about Labor’s franking credits policy impacting on self-managed super funds policy is all smoke and no fire according to a QUT Law School Visiting Fellow.

However, he said people with shares in their own name – including many pensioners - could suffer a financial setback.

Alastair MacAdam, a former QUT law lecturer with a background in the legal profession and tax accountancy, claims those with self-managed superannuation funds don’t have to lose out at all. 

“For more than 30 years dividends paid to shareholders have had credits - franking credits or imputation credits - attached to them that are equal to the amount of company tax already paid on those dividends,” Mr MacAdam said.

“So if a shareholder pays tax, they can use the franking credit to reduce their tax, but if they pay no tax, then the franking credit is refundable as a cash payment from the government.

“Opposition Leader Bill Shorten has announced that if Labor is elected, they will continue to allow shareholders to reduce their tax with franking credits, but will stop giving cash refunds for excess credits," Mr MacAdam said. 

“There has been much debate and fear generated over this yet there is a way in which people can avoid losing out on the refund, at least so far as shares that are held in a self-managed super fund are concerned.

“Government and industry funds will not be affected by the proposed policy so individuals can simply switch to one of those funds but still effectively maintain their self-managed status.

“QSuper, for example, offers a ‘self-invest’ option and others do too. So you can capitalise on their knowledge but have your independence too, as well as choose where your shares go.

“If you don’t pay tax, or you are over 60, you can still direct that your parcel of shares be made up of companies with franked dividends. The catch is you have to select companies from the top 300 ASX but it is a genuine alternative to a self-managed fund and comes with franking credits," he said.

“So while Labor has said it will save $6 billion for the economy but they are being disingenuous; probably half of that is more realistic.”

Mr MacAdam said the people who will be most affected by the proposal are pensioners.

“Labor has said that anyone who was classified a pensioner in March 2018 will be exempt but everyone who becomes a pensioner after that will lose their imputation credits,” he said.

“There is all this talk about ‘the big end of town’ as if everyone with shares is a fat cat but in reality, lots of people inherit shares from family while others bought into the popular public floats by the Commonwealth Bank, AMP and Telstra over the past two decades.

“For many people who are on a full or close-to-full pension who have a small parcel of shares those franking credits are hugely important as a supplementary income.”

Mr MacAdam said people with self-managed super funds who do not pay tax can get around the proposal by selling shares held by their fund and transferring a lump sum into an industry or government fund that has the ‘self-invest’ option.

He said that for people whose fund was in the pension mode, there would be no capital gains tax payable on the sale of the shares as such funds are completely exempt from income tax.

“However, if you own shares outside of a super fund, you may be affected by this policy. You can sell them and put them into a fund but you will pay capital gains tax. Pensioners might be able to do this too but it will be a lot harder for them,” Mr MacAdam said.

“Of course the fact a policy has been announced doesn’t mean change will occur straight away. It could be years before we see actual legislation.

“It is also important that anyone in such a situation should seek independent financial advice.”


FOR THE FIRST time in the five years and 10 rounds of the Scottish Pacific SME Growth Index, the number of SMEs who turn to their main bank to fund growth has dropped below the 20 percent mark.

The SME Growth Index research released today is conducted independently by banking analysts East & Partners, on behalf of national working capital funder Scottish Pacific.

In March 2019 Index findings, for the first time SMEs are about as likely to turn to an alternative lender as they are to ask their main bank to fund growth.

East & Partners predicts that, if the current trend continues, by the second half of 2020 alternative lenders will overtake SMEs’ main relationship banks as the key funders of new SME business investment in Australia.

Scottish Pacific CEO Peter Langham said there were many reasons behind this trend, including banks’ credit conditions tightening, business owners looking for more flexibility and funding that allows them to grow, as well as the tightening property market and SMEs’ dislike of having to use property as security for their business loans. 

“Small business owners traditionally have been ‘rusted on’ to their banks, but they are becoming increasingly open to non-bank alternatives to fund their operational and strategic growth needs,” Mr Langham said. 

"Scottish Pacific has been helping business owners for 30 years and we continue to grow. The main change we've seen in the non-bank lending environment recently is that we are funding larger deals.

“The research shows that when it comes to funding growth, traditional bank borrowing keeps trending downwards, as more businesses ‘shop around’ for a customised funding solution.”

The research was conducted from November 2018 to January 2019, after publication of the Royal Commission into Banking’s interim report and during the last round of its public hearings.

This round, significantly fewer SMEs, when asked “how are you going to fund your expected business growth in the next six months?”, said they’d approach their main bank (19.5%, a drop of more than three percentage points from September 2018).

When polling began in September 2014, just over 38 percent of SMEs were turning to their main relationship bank to fund their planned growth.

The biggest gains were made by the non-bank lending sector, the first choice as funders of growth for almost 18 percent of business owners (up from 15 percent six months ago).

This trend towards non-bank lending is supported by data showing that many of those not using non-bank lenders in 2018 were open to do so in the future. In March 2018 43.5 percent of SMEs said they wouldn’t consider using non-bank lending. Twelve months on, not even one-third of business owners are in this category.


The most popular alternative finance product nominated by SMEs to fund their growth in 2018 was trade and import finance (currently used by almost 33% of all businesses polled), followed by debtor or invoice finance (9%), with fintech and other funding methods used by 5.8 percent of the 1257 SMEs surveyed.

Few businesses in the $1-20m revenue category are using merchant cash advance (2.5%), peer to peer lending (1.4%), crowd-funding (0.9%) or other online lending options (0.7%), Mr Langham said.

About 96 percent of SMEs are drawn to alternative lenders mainly because of fast credit approval and reduced compliance, and the advantage of not having to borrow against the business owner’s home. Growth SMEs are five times more likely than non-growth SMEs to use an alternative funder in preference to a bank.

He said despite the gains into the SME market made by non-banks, there was still room for sector growth.

“Two-thirds of SMEs said they did not use non-bank lending options in 2018, but more than half of these said they’d be open to it in the future,” Mr Langham said.


One of the big advantages of alternative lending is that in most cases, business owners don’t have to put the family home up as security.

“Alternative finance is building momentum, underlined by the clear reluctance of business owners to borrow against property. The SME Growth Index found that nine out of 10 SMEs would be willing to accept a higher interest rate if it meant they didn’t have to provide property security.” Mr Langham said.

For the twice-yearly SME Growth Index, the owners, CEOs or senior financial staff of 1257 SMEs across a range of industries and all states, with annual revenues of $A1-20 million, are surveyed and interviewed.

Other key findings this round:

* A high proportion of SMEs relying on 'dumb debt' (such as personal credit cards) or owners' equity to fund new productive capacity - strategies that can actually limit new business investment opportunities.

* Business owners are more optimistic about growth than they have been for three years. More than 53 percent of SMEs are expecting to grow in the first half of 2019, at an average revenue increase of 4.9 percent.

* Regardless of any long-term financial services regulatory changes which may flow from the Royal Commission, in the short-term SMEs are already seeing an impact on their access to funding. More than half of all SME respondents say the Royal Commission has made it harder, or will make it harder, for them to access business funds.

 Click for full copy of SME Growth Index


About Scottish Pacific

Scottish Pacific is Australasia’s largest specialist working capital provider, helping thousands of business owners with the working capital they need to succeed. Scottish Pacific lends to small, medium and large businesses with revenues ranging from $500,000 to $1 billion.


By Leon Gettler >>

THE Royal Commission is opening new markets for small operators moving into wealth management.

Simon Madder, the CEO of Prime Financial, said banks were now getting out of wealth management following the shellacking they got at the Royal Commission, opening the way for small businesses.

And they do it much better than the banks, simply because the banks are too big. 

“I think in its simplest form, personalised service,” Mr Madder told Talking Business. “I think there’s a challenge in getting too big and I think if you don’t have the right systems and processes and you’re not close enough to the customer or client, then the theory of what you’re trying to do versus the practice can become quite different.

“I’m not suggesting that banks in the past haven’t put clients first…but perhaps it’s been more product driven than advice or service based.”

Mr Madder said it was understandable why banks had originally moved into wealth management. It was all to sell their clients more services and products, such as insurance.

But banks had moved away from that because it was too difficult.

“You can understand given some of the challenges that have been faced and trying to disentangle the products from the advice piece why the majority of the banks and the investment banks have headed away from it,” Mr Madder said.

He said the findings of the Hayne Commission had shaken the industry.

“In its simplest form, it was shining a light on practices that were fairly questionable.”

The problem with the banks is they had put the product first, ahead of service to the client.

The Royal Commission also raised questions about educational standards and making sure the right people were there giving advice to a client.

“Absolutely it’s impacting, whether it’s a large institution or independent non-bank owned advisory firms,” Mr Madder said. 

“Rightly, clients are asking questions and that can only be a good thing, I would have thought.”

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at


DIGITAL banking platform start-up, Trade Ledger, was named the Ashurst Fintech Start-up of the Year for 2018 after expanding into the UK market and signing up a series of major deals in its first year.

The award goes each year to an Australian financial technology (fintech) start-up ‘that has disrupted the financial services sector with new and innovative services, creating competition and transforming the way we experience financial services’.

Trade Ledger has managed this by being the first corporate lending platform in the world to automate the entire credit assessment process, assess SME supply chain data in real-time, and calculate risk – down to the individual invoice. 

This allows banks and other business lenders to tap into the A$90 billion of unmet business credit demand in Australia, and US$2.1 trillion globally.

“As the global economy transitions towards smaller, high-growth businesses – our all-important start-up and innovation ecosystem – business lenders have an obligation to learn how to supply working capital desperately needed by these businesses of the future,” Trade Ledger CEO and co-founder Martin McCann said.

“Australian banks and business lenders also face risks on several fronts. On the one hand, they need to improve both their cost/income ratio and their capital efficiencies within this segment that is traditionally considered as high risk.

“On the other, they are facing increased competition from technology behemoths such as Amazon, Tencent, and eBay, who are all threatening to use their hordes of data to enter financial services.

“The Trade Ledger platform equips these lenders with the same degree of technological proficiency as these massive tech firms, while arming them with the tools needed to meet our booming innovation ecosystem’s need for credit,” Mr McCann said.

This is the third year of the FinTech Awards. The awards owner, Glen Frost, said he was particularly impressed with both the quality and quantity of this year’s applications.

“The 3rd Annual FinTech Awards recognise and reward the innovators and the risk takers,” Mr Frost said. “To be recognised by your peers for your innovation and entrepreneurial spirit will sustain you through the tough times, it will motivate you, and it will show your customers, investors and staff, that you’ve got what it takes.

“I congratulate Martin McCann, and his team at Trade Ledger, on winning the Ashurst FinTech Startup of the Year.”


THE INSTITUTE of Public Accountants (IPA) has submitted its pre-Budget submission to the Federal Government urging for action on an array of policy fronts -- in particular, the need for genuine and holistic tax reform.

“Our pre-Budget submission is closely aligned with our Australian Small Business White Paper with many recommendations to support the productivity and growth of the sector,” IPA chief executive officer, Andrew Conway said. 

“Unless Australia can stem the tide of the flagging productivity levels, our economy will continue to decline and our current living standards will suffer accordingly.

“Taxation is just one area that can stimulate economic growth if done correctly," he said.

“Currently we are seeing tax policy proposals from the Government and the Opposition which are quite disparate and we need all parties to be at least roughly on the same page if true and bold tax reform is to take place.

“The community needs to give the Government and Opposition to have the robust conversation on tax that is required.

“All Australians need to stand up and put the public interest ahead of political and self-interest.

“We will continue to voice our disappointment and frustration with the stalled tax reform process.

“A piecemeal approach is sub-optimal and may even prove harmful to long term reform,” Mr Conway said.

More information on the IPA’s pre-Budget submission:


SUPERANNUATION funds could provide growth capital for businesses large and small, according to a new discussion paper from Industry Super Australia.

Under the right circumstances, superannuation funds could be directed to complement more traditional capital sources such as banks, according to the paper’s author, Industry Super Australia chief economist Stephen Anthony. 

Dr Anthony’s paper, Should superannuation funds do more direct lending to business?  argues that super funds’ traditionally low asset allocation towards credit to non-financial corporations could be improved via an upgrading of funds internal assessment capacities or via partnerships with banks. 

Dr Anthony said currently Australian banks and overseas investors – including pension funds – were the dominant players in lending to domestic non-financial corporations.

Dr Anthony said research showed that today there was significant untapped potential for super funds in this asset class.

“Expanding superannuation funds’ presence in direct lending will help local business grow and deliver economic benefits,” Dr Anthony said. “We are in a better position to commit to long-term loans in Australian dollars – one important factor as businesses doesn’t need to worry about currency risks.

“SMEs need better access to both debt and equity capital and super funds can help. But any arrangements need to offer attractive returns to funds”

Dr Anthony said the recent spate of corporate leaders calling for super funds to participate more in this space needed to package propositions with more of an eye to returns for super fund members and how the superannuation system works.

“Businesses calling for more super fund participation in direct lending should recognise that funds’ capacity in this area relies on steady and growing inflows from workers’ contributions – facilitated by the existing default superannuation system,” he said. “Business needs to be aware of this and continue to support and enhance the default system that may ultimately deliver the funding they need one day.”

Industry Super Australia is an organisation that provides policy, research and advocacy on behalf of 16 not-for-profit industry super funds, as the custodians of the retirement savings of six million Australians.


By Leon Gettler >>

WITH SIGNS of a bear market at the end of last year, there were all sorts of warnings that 2019 would be a tough year for share markets.

But investors can expect a good year ahead in the markets, if they can deal with the volatility, says AMP chief economist Shane Oliver

Dr Oliver told Talking Business that there were some issues, like the uncertainty about trade and Donald Trump, still to be resolved.

“But I think this will be a better year for the simple reason that we don’t see a global recession, we don’t see a US recession any time soon,” Dr Oliver said. 

“Yes we have seen a slowdown in growth but we saw slowdowns in growth in 2015, 2016 and 2011 but they weren’t associated with global recession at the time.

“Consequently, if investors come to the view ‘We’re not going to have a recession after all, maybe it’s a few years down the track but we’re not there yet’.  Then share markets are pretty cheap, even at these levels,” Dr Oliver said.

“We still have an environment of pretty easy monetary global conditions globally.

“I think this will set up for a better year.”    

He said however that volatility would continue.

He said there was little volatility in 2017 but usually years of low volatility are followed by periods where it is high.

Dr Oliver said earnings growth this year would be more moderate compared with last year, which was helped by Donald Trump’s tax cuts which added 5-10 percent of earnings growth. 

He said earnings growth would slow from around 20 percent to about 5 percent. Still, the share market could rally in that sort of environment.

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at



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