Grant Abbott, chairman of the Succession, Asset Protection and Estate Planning Advisers Association and CEO of LightYear Training Group, said if this happens, the implications could be enormous.
“That opens the door to a broad-based wealth tax, not limited to super and potentially applied to assets, estates, and investments,” Abbott said.
“We’ve moved from a 15 per cent environment to 30 per cent, then 40 per cent, and this could be the start of something much larger.”
Abbott said that while on the surface the new tax looks like a “fairness” measure, if you “dig deeper, the complexity (and danger) becomes clear”.
“The ATO will need data from every superannuation account an individual holds to correctly calculate this new tax,” he said.
He added that the new tax may get “tricky” if one fund makes a loss while another shows a gain, and also questioned how capital gains will be tracked across multiple funds.
“What happens when timing issues – like estate settlements – come into play?” he said.
“The administrative burden alone could be enormous, and the margin for error, even greater.”
Abbott said one of the biggest concerns he has with the Div 296 tax legislation is still the process that happens when someone passes away.
“If a member dies, and it takes a year or two to finalise the estate or sell assets, the capital gains realised during that period could artificially push the account balance over the tax thresholds,” he said.
“That means 40 per cent tax on the earnings above $10 million, plus an additional 17 per cent death benefits tax if benefits go to adult children. Add those together, and you’re suddenly looking at an effective 57 per cent ‘death tax’.”
Abbott said advisers and trustees should stay informed as the legislation is still being developed. He added they should also use predictive modelling to understand how estate events or market changes could push clients into higher brackets.
“Also review fund structures, reversionary pensions, and estate planning to minimise exposure, and educate your clients. It might take years for Div 296 to fully roll out, but the direction is clear. We need to plan, adapt, and stay one step ahead.”
Even this revised legislation will have massive flaws and unintended consequences (maybe the consequences are intended?)
This legislation is well outside the thinking powers of Chalmers and probably the bureaucrats in Treasury. There is no way the mess this attack on superannuation will ever be able to be unwound by subsequent governments when it comes to realization that Australia’s superannuation scheme has been all but destroyed by Chalmers et all in the cash grab to shore up a defective budget.
What budget? Chalmers hasn’t done a budget since being appointed treasurer!
The original bill excludes death of a member before 30 June. That needs correcting in V2, however, think it is a lower order issue.
The URCG is going to be a nightmare