WHAT IS DIVIDEND IMPUTATION?
* Designed to stop company profits being taxed twice, dividend imputation allows shareholders who are paid dividends to get a tax credit in recognition of tax already paid by the company.
* Shareholders can offset the tax credit against their income tax.
WHAT DOES LABOR WANT TO DO?
* Federal Labor wants to scrap an arrangement that allows individuals or superannuation funds to claim a cash refund if the imputation credit they receive is higher than their tax bill
* That means people, such as retirees drawing down superannuation, who pay no income tax will no longer be able to claim the cash refund
WHAT WILL THE IMPACT BE?
* Critics say the proposed changes could significantly affect the cash flow of low-income retirees, including those in self-managed super funds.
* The proposed changes could affect 1.1 million members of more than 591,000 self-managed superannuation funds, plus others.
* Opponents say the proposed changes could hurt shareholders who have made investment choices based on current rules, and lead to a re-evaluation of some shares on the stock market currently favoured for their dividend imputations.
* The Parliamentary Budget Office estimates the policy will impact just eight per cent of taxpayers, including about 200,000 self-managed super funds.
