‘Total ignorance’: Wilson warns franking changes will cost the budget

After embarking on a roadshow around Australia, emailing shareholders and communicating with the major parties to raise awareness on the issue, he has found an unlikely friend in the Greens.

“We’ve sent numerous letters to [Treasurer Jim] Chalmers and [Prime Minister Anthony] Albanese, and they haven’t responded,” he said. “But our conversations with the Greens have been incredibly constructive, so it’s up to the Greens and the independents.”

Others, including Shaw and Partners head of equities Anthony Wilson, have also criticised the measure, saying it would lead to companies taking on debt rather than raising equity to finance their growth.

“It will result in a higher cost of capital and higher corporate leverage in Australian companies,” Anthony Wilson said.

“In times of crisis, the higher leverage which the proposed [legislation] encourages will lead to higher volatility on the listed market. In the worst circumstances, it will result in large capital losses for both retail and institutional investors in the case where overleveraged companies are not able to raise money via a capital raising to repair their balance sheets.”

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Geoff Wilson says there is a separate “hand grenade” in another section of the legislation that eradicates companies’ ability to distribute franking credits to shareholders via off-market share buybacks – estimated to save Treasury $550 million.

“There’s a paragraph that effectively stops companies doing off-market buybacks even if those buybacks aren’t associated with any franked dividends, and that’s just badly drafted,” he said. “That’s totally unacceptable.”

But Wilson maintains it’s the $10 million saving measure that is most problematic. “It virtually raises no money, and it will end up leading to a $1 billion or $2 billion hole in the budget,” he warned.

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