Member for North Sydney, Kylea Tink, introduced the amendment calling for the $3 million cap to be indexed. The motion was defeated 52-9.
“The lack of indexation is out of step with current accepted tax principles, with most other elements of our super system being indexed from contribution limits to the transfer balance cap and lump sum benefits,” she said.
“Leaving the cap at $3 million without indexing it will mean people in my generation will have an entirely different and relatively higher threshold to that of my children, with the real value of the threshold likely falling to $2 million due to inflation by around 2040.”
Tink continued that many individuals and stakeholders across this country broadly supported the intent and principle of the bill: to rein in generous tax breaks for super balances beyond what is currently deemed necessary to fund a comfortable retirement.
“However, in its current form and without indexation, this legislation leaves many deeply concerned. The large superannuation balance threshold should be indexed to keep pace with inflation, avoid bracket creep and ensure greater intergenerational fairness,” she added.
“This amendment does just that. It is sensible, it is simple, it is practical, and it is in line with current taxation law.”
Assistant Treasurer Stephen Jones said the government would not be supporting the amendment.
“For a matter of context, the average balance on retirement today is somewhere between $150,000 and $200,000 – that’s a long way south of the $3 million threshold that has been set in the bill before the house, and it’s for that reason that we’re confident that less than 0.5 per cent of all fund members will be caught by the new provision,” he said.
“We don’t see any significant shift in that in the near term. It is, of course, the norm within the taxation system that we do not index tax thresholds. The previous government didn’t index the division 293 tax threshold. It is, of course, open to a future government to decide to lift the threshold, and a future government would make that decision in the context of all of the other fiscal pressures that are bearing upon a government at that point in time.”
Peter Burgess, SMSF Association CEO, said the vote was disappointing but not unexpected.
“The government has the numbers in the lower house and we always expected it to be [voted down],” he said.
“There is still a bit to play out in the lower house. It is still being debated. There are other amendments from other parties. The opposition is asking for the removal of Schedules 1-3. If it is passed, it has to get through the Senate, and we hope it may be defeated there.”
When Labor enter into an agreement with the Greens they may we reduce it to $2 million and try again.
everything in our lives is based on inflation so why not recognise that same point in the taxing of UNREALISED CAPITAL GAINS. Are politicians also going to NOT recognise the indexation on their next pensions inccreases? Pathetic and scandalous.
Simple answer. Allow funds to elect either based on tsb or actual income.
The reason this will never happen as large balances will all leave retail and esp union funds for smsf’s.
The whole source of the problem is accounting in industry funds. They can’t calculate member income, only smsf’s can. This why they want to tax on TSB which is why they end up taxing unrealised gains.
Stephen Jones obviously should be able to retire on his average $150-$200k to lead by example. So, when are the rules for politicians super being aligned to this cap?
But remember, this AT is focused on the union funds, not SMSFs that are still perceived as rivals!
I just hope Jones’ poor performance is recognised at the next election.
Taxing unrealised gains in a pocket of the system like this is bonkers!
It would make so much more sense to limit the gravy train of franking credit cash refunds by applying them in a manner in which they were designed – a solution to double taxation!
If ECPI brings the Fund Tax to Nil, why are the franking credits still flowing? This simple change would probably retain more $ within the tax system than this proposed $3M debacle & be so much simpler to comply with. To think of the layers of compliance in generating/reporting dividends/distribution, & so little of the tax calculated/applied is being retained in the system to fund necessary services, it’s counter intuitive to funnel it back to some investors who don’t have much tax exposure. NDIS, Education & Health could be better off!
Pardon me, but this is NOT what I see every day as an auditor.
…”average balance on retirement today is somewhere between $150,000 and $200,000″
May I also say, the number of persons impacted by poor legislation in no way excuses the law. The Bill undermines long recognised principles of tax policy. It’s an embarrassment. This particular brainwave would have been shouted down by every tax policy student & lecturer in my year.
The lack of indexation is an issue with this Bill but only one of many given its poor design. I would have like to see the industry concentrate on the central issue of the taxing of unrealised capital gains – a single issue, but fought with purpose. Having even one more issue dilutes the impact
Very disappointing and still sad to see an Assistant Treasurer quoting people only having $150-$200K in Super when he clearly knows that those reaching retirement in future years will have much higher balances because of career-long mandated SG contributions since 1992 and additional personal contributions.