Naz Randeria, managing director of Reliance Auditing, slammed Delahunty’s dismissal of industry concerns as hand-wringing.
“Land tax is already a contentious issue and often an inequitable burden. It disproportionately affects owners of ancestral properties or large landholdings with modest improvements, where rental income often fails to cover the annual tax bill,” Randeria told SMSF Adviser.
“In cases involving vacant land, there’s no income at all — yet significant tax is still levied. These owners are frequently forced to sell, simply to meet their tax obligations.”
The issue is compounded as land tax is calculated on unimproved land value, as assessed by the Valuer General, and aggregated across all holdings, which pushes many into higher tax thresholds irrespective of income.
“SMSFs that hold direct property are not exempt from land tax either, a fact Ms Delahunty seems to overlook,” Randeria said.
“By comparing Division 296 to land tax, Ms Delahunty inadvertently reinforces the industry’s concerns. SMSF members with appreciating property values may now be hit with both annual land tax and a tax on unrealised capital gains. If the fund lacks liquidity to cover these taxes, trustees may need to pay out of pocket — an option not always feasible — or sell assets, often at a disadvantageous time.”
Randeria added that the implications are significant for SMSFs holding illiquid, long-term investments like property or infrastructure.
“Taxing paper wealth may force premature sales, undermining long-term investment goals. This is not hypothetical — it’s a real and growing risk.”
“These concerns are echoed in the RBA’s recent Financial Stability Review, which noted that nearly 50 per cent of assets in large APRA-regulated funds are held offshore. Many of these are currency-hedged, exposing them to liquidity stress if the Australian dollar falls.”
Furthermore, she noted that funds could face margin calls in such a scenario, triggering rushed asset sales and weakening the broader financial system. Introducing a tax on unrealised gains would only heighten this volatility.
“Consider a high-income earner earning $250,000 who has responsibly built a super balance above $3 million. Their employer contributions are already taxed at 30 per cent under Division 293,” she continued.
“Division 296 would impose an extra 15 per cent on earnings, including unrealised gains, above the threshold. If their SMSF holds property, they also face annual land tax, and on death, a further 15 per cent death benefits tax may apply. The effective marginal tax rate on their super could exceed 60 per cent. This isn’t tax fairness — it’s penalising responsible saving.”
Randeria added that Div 296 also sets a worrying precedent and noted that if super gains can be taxed before they’re realised, “what’s to stop this logic extending to shares, property, or small businesses?”
“At a time when APRA is already scrutinising valuation and liquidity practices, taxing unrealised gains is anything but prudent. For SMSF trustees and professionals, Div 296 marks a fundamental shift in how super is taxed — one that threatens stability, investor confidence, and the long-standing principles of our retirement system.”
“This policy doesn’t need refining — it needs to be scrapped before it causes lasting damage.”
It is quite remarkible how partisan and out of touch ASFA chief executive Mary Delahunty really is.
I move clients OUT of Industry funds whereever possible and appropriate because I do not TRUST this crooked system.
Naz Randeria commented “This policy doesn’t need refining — it needs to be scrapped before it causes lasting damage.”
This policy should have not even been introduced to the public forum. It should be an embarrassment to our Treasurer who introduced it, to Treasury itself, to Albo when he stood there listening as it was introduced, to the Labor party generally who stand as a block in favour of it and of course the Greens who are never embarrassed about anything and some Senators.
It was introduced days after the disdain that Chalmers had for those very few member funds over $100m that he mentioned in a speech, and as justification to stop other funds ever getting remotely close to these levels, as some sort of punishment for being successful.
News to Chalmers – $1.7m when this was introduced in Feb 2023 is now worth $2m (eg TBC) with inflation only. So the buying power of $3m is already substantially eroded.
Just about every part of this formula is unsound. And these people want to run the country again for another 3 years.
Chalmers won’t even comment on this when asked point blank if he still stands behind it. The least he owes us is to face us and tell us what his intentions are going forwards if they win the election. As affected individuals, we still can’t plan what to do as we are still in limbo and my own verified sums show a tax rate over any personal tax rates if held outside of super. Punishment and greed – that is all that there is to see here from interests from Labor specifically and unions and APRA funds generally.
This Div 296 is both shoddy and shady.
Well said Naz!
The lifecycle of super doesn’t seem to be understood by the policy designers. Add up all the taxing points in the cycle, as you have, and it is really quite a list.
A simpler (final) change to super taxing policy could be to re-introduce end benefits tax. It really is the easiest way to target higher balance members as there is already a well established offset ability within the personal tax system so, those with lower income could be neutralised. No significant systems changes would be required and, as those in the industry know, the largest generation of superannuants are in the draw-down stage, so it really is a ripe opportunity.
To minimise any change in behaviour by some electing to draw lump sums rather than pensions, the lump-sum tax free threshold could be re-introduced. So many easier options but what did Treasury do? Come up with a ridiculous formula based solution that doesn’t not work. The argument is not whether or not to tax unrealised gains – that should be a fundamental principle for tax policy – it doesn’t happen. The discussion should be that policy needs to be informed by those most impacted and, in the case of Div 296, that is SMSFs.
The fact it is called “Div 296” shows a complete lack of thought around this design. The average superannuants would need it explaining. Can’t these laws be named in user friendly terminology?
“re-introduce end benefits tax”
End benefits tax was never abolished, they simply changed it so that inept governments could get their hands on it earlier, in the form of “Contributions Tax”.
Some people have just forgotten it, and now we have another inept government which can’t balance the books wanting an extra bite at the cherry, at the expense of the Australian population.
FFS… they’ve ruined most parts of the Financial Services industry…
1. The reduction of Risk based advisers… contraction of Insurance Companies due to reduced new business.
2. Cost of advice is excessive due to over-reaching regulatory pressures and red tape…. still not fixed… despite
3. Compensation Scheme of Last Resort – Insurance Scheme which starts after claims are created… and on a Black Swan event… Good advisers punished for other advisers’ bad advice, not sustainable… The Black Swan cause not even addressed. Two more Black Swan events coming up to (surely) decimate the advice profession further.
4. ASIC Fee tax… so that advisers pay to get sued by ASIC, with remediation being given to the “inept government” which has no control on money anyway.
…and there are many more examples of stupidity interference by this and the previous inept governments. Keep your greedy little eyes and fingers out of the population’s retirement purse.
I agree with the above analysis, it is a pity that our Dr jimbo and Dr Albo hve not recognised
Spot on. ASFA presumably regards SMSFs as the enemy but this is very short sighted. The unindexed Div 296 $3M threshold, even at relatively low inflation rates (and likely they will be higher), will be a modest sum before we realise it and we know, from the failure of governments to index personal taxation thresholds, how hard it is to introduce indexation subsequently.