Naz Randeria, managing director of Reliance Auditing Services, told SMSF Adviser she feels a “compelling need” to use the social media platform to reach a younger audience and warn them about the upcoming changes to superannuation legislation and the impact it will have on their future.
“I felt I didn’t have a choice. I wanted to break down the legislation on the $3 million super cap to show people how bad these measures are,” she said.
“TikTok is a good medium on which to communicate. Lots of people watch TikTok, not just the younger generation. I want to explain these proposed measures to them and help them understand how detrimental they will be. I want 20-year-olds to know that it is not just the rich who will be affected in the future.”
Ms Randeria said the true burden of the new tax is likely to be on the younger generation, who may not even yet understand the implications.
“For those just starting their working careers, they’re at risk of breaching the threshold in years to come, particularly if they make extra contributions throughout their working life,” she said.
“Examples using simple investment calculators highlight that a 20-year-old today who earns a modest six per cent on contributions over the next 45 years of their working life will easily breach the threshold by retirement.”
With the next round of submissions on the legislation closing this month, Ms Randeria said she is hoping her social media presence will help keep the issue at the forefront of people’s minds.
Her posts explain various potential scenarios that may happen if the legislation is passed in its current form.
“There is, for example, the potential for someone to pay 60 per cent in tax on their superannuation,” she said
“High-income earners who breach the Division 293 adjusted income threshold already pay 30 per cent tax on their concessional contributions. There is currently no family means testing on Div 293 for single-income earner families, which already makes this tax inequitable and does not allow for this group to save significant amounts for retirement.”
She continued that should the main income earner pass away, and the taxable benefits be passed onto non-dependants, it would add a further 15 per cent tax on the taxable component.
Should the superannuant’s balance then breach the unindexed $3 million cap in future, there will be a further 15 per cent tax levied on the excess, including unrealised gains, meaning the potential tax paid by the superannuant would be between 45 to 60 per cent on taxable and excess components.
“This measure would act as a disincentive for high-income earners to salary sacrifice, invest, and save for their retirement,” she said.
Highly volatile assets are also a concern, she said, especially for younger investors who are often attracted to assets such as cryptocurrency.
“Investors are lured by the huge uplift in values of these types of assets. Generally, there is no income generated from holding such investments. The superannuant holds such assets exclusively for capital growth,” she said.
“It is not an uncommon feature that the year-end valuation of crypto assets could be astronomically high, but the asset may cease to exist or become unrealisable at the time of lodgement of return or payment of tax, as we have recently seen with the various collapses of FTX, Celsius and Luna. This could result in extremely unfavourable and unpredictable future investment outcomes for investors.”
Another potential scenario involved managed investment schemes which have periods where assets are locked out.
“I have so many scenarios and examples of how this tax is going to affect a lot more people than the wealthy. People think these scenarios will be few and far between, but as an auditor, I can see what people hold in their superannuation and am constantly now thinking ‘I wouldn’t want to be in this position’,” she said.
“I don’t provide financial advice, but what I am seeing is scary. I hope my foresight is wrong, but I don’t want to be here in a couple of years saying ‘I told you so’.”
The above is all correct, and this is why this proposal will not see the light of day let alone make it to the Senate. The mere fact that the current proposal will tax UN-Realised Capital Gains is in its simplest form of English, STUPID.
I do hope that you are correct Mark. This tax is horrendous for my own circumstances. However, it went through the HofR without much resistance. Letters to Treasury have had blithe responses and they themselves seem not to understand the punitive nature of this tax.
in 2018FY my super balance went from just under $3m (as at June 2017) to just under $8m 2023FY (30th June 2023). That’s a crazy 265% in just 6 years, mostly due to UN-Realised Capital Gains.
I will be forced to pay well above my personal flattened income tax rate (currently around 28% + medicare due to threshold flattening – 37% top tier tax rate) and under this scheme, 46.9% tax on “Taxable Income” for 2022 as real-life example. (Note – I refuse to use the tax I will pay under this scheme in terms of “Earnings”, hence I use the terms tax on “Taxable Earnings” of the fund). It will eat up almost 76% of our family personal after tax income (I won’t have enough to buy even food after insurance etc), and again, they blithely state that I can pay it from my SMSF balance. Happy days – NOT.
Treasury responded to advise that I will still be getting a concession within super! They are having themselves on and don’t understand their own policies! It is so STUPID, as you say, in plain English, and this is the calibre of who looks after tax payers money.
I am not leaving this to chance and have written a submission to the Senates Committee.
This is a brilliant initiative. Young people are not currently engaged as they see this as a tax on old, very wealthy people when, with an unindexed cap, it’s actually a tax on the future super of young people.