SMSF Association CEO Peter Burgess said the SMSFA was disappointed but not surprised by yesterday’s vote that saw the government use its majority to pass “a deeply flawed new tax on large superannuation balances”.
The bill now moves to the Senate where the government will most likely need the support of the Greens and at least three crossbench members to pass it.
“In all likelihood, the fate of this bill now rests in the hands of the Senate crossbench, and we are urging them to listen to the concerns raised by a growing number of constituents,” Burgess said.
“Despite all the evidence about unintended consequences that have been presented to the government since this tax proposal was first mooted in early 2023, it seems determined to press ahead with the taxation of unrealised capital gains that will be disastrous for thousands of primary producers and small and family businesses who will be impacted.”
Burgess said the combination of taxing unrealised capital gains and no indexation will also have a devastating impact on the venture and start-up sectors that rely so heavily on the SMSF sector for funding.
“At a time when we need to lift economic growth, these sectors are a critical driver of productivity, and we should be focusing on measures that encourage this growth rather than stifling it,” he said.
“The decision to tax unrealised capital gains sets a dangerous precedent for tax change in this country, overturning nearly 40 years of a tax practice that delineated between income and capital gains tax, with the latter only payable on the realisation of an asset. And indexing tax thresholds is a long-established principle.”
The association acknowledged the support of independent members in the lower house who on Wednesday put forward the association’s amendment to index the cap, and for questioning why actual taxable earnings cannot be used in situations where these earnings can be reported.
“Since the outset, we have maintained that the only way of removing unrealised capital gains from the calculation of earnings is to ensure actual taxable earnings are used,” Burgess said.
“Denying the option of using actual taxable earnings simply because some large funds are not able to track these earnings at a member level means the vast majority of members impacted by this tax will unnecessarily be forced to pay tax on unrealised capital gains.”
Although the amendment to index the cap was defeated in the lower house, the absence of indexation and the rationale and consequences of taxing unrealised capital gains are expected to be hotly debated in the Senate, where the government will need the support of others to pass the bill.
“We have always maintained there are other ways of clawing back the superannuation tax concessions for individuals with large superannuation balances and taxing unrealised capital gains is not the answer,” Burgess added.
“The fact that the government proceeding with this legislation means they are confident they have the support of the Senate, and we urge the Senate – and especially the crossbench – to listen to these legitimate grievances and vote down this legislation.”
Keep up the good fight Peter. If this bill gets through it certainly won’t be for any lack of effort on your part.