The report from the Senate inquiry is due to be presented in Parliament on Friday, and although Burgess said he is not expecting to see any changes to the proposed legislation, there is still an opportunity to push for simple amendments during the debate to follow in the Lower House.
“It’s just the beginning with the Bill set to be introduced to the Lower House,” Burgess told SMSF Adviser.
“It was originally meant to go through this process in Parliament’s last sitting days and I believe it will be pushed through to be debated next week as the government wants to try and get this finalised by the end of this financial year to give people 12 months to make any changes they may need.”
He expressed confidence that the Teals will attempt to introduce some amendments to the Bill. However, he also believes that the bill will pass with minimal challenge, as the Greens are expected to align their vote with the government.
“It is the last opportunity when the Bill gets to the Lower House to make any changes so we are still pushing hard to get some simple amendments through,” he said.
“We have been in discussion with the Senate crossbench and although it is unusual for them to block a Bill, they may vote for some amendments to improve it.”
He continued that two of the “simple” amendments include indexing the cap and replacing the complicated calculation on unrealised gains with a proxy, namely an earning rate equal to the 90-day bank bill rate.
“The large funds are saying they don’t have the ability to know what taxable income is at a member level, but we argue that if that is not possible, then something that is a close proxy to doing that would be the 90-day bank bill rate,” he said.
Burgess said that although he had the opportunity to present to the inquiry, he was disappointed he was not given the chance to raise a number of the association’s concerns, including the controversial aspect of unrealised capital gains and the lack of indexation.
He said he was also shocked to hear evidence presented to the inquiry that suggested that it was not unusual to see superannuation caps not indexed in line with inflation.
“That is something with which we disagree,” he said.
“We can only now live in hope that they may index the cap. We have not heard anything from Treasury that there may be any changes to the Bill, and because they only called for supplementary submissions to be done by 2 May before a 10 May report it’s unlikely there would have been enough time to make any changes.”
What happens if an SMSF owner just pack up the Bitcoin from their SMSF and leaves the country, never to return?
If individuals are unable or unwilling to comply with tax obligations on their assets, particularly self-custodial assets like Bitcoin held in SMSFs, it could potentially lead to various consequences. One possible scenario is that those individuals may choose to relocate to other jurisdictions with more favorable tax environments, effectively evading their tax liabilities in Australia. This could result in a loss of tax revenue for the government and potentially undermine the effectiveness of the tax policy. More unintended consequences.
Furthermore, if a significant number of individuals cannot pay made up taxes on their assets, this will further erode public confidence in the tax system and create challenges for enforcing tax laws. This may necessitate increased regulatory measures and enforcement actions by authorities, which could be costly and resource-intensive.
It’s also important to consider the broader economic and social implications of such actions. Policies like this seemingly encourage Tax evasion and non-compliance (intentional or otherwise), undermining the principle of fairness in taxation which will only lead to greater disparities.
What this legislation demonstrates is that we have a government devoid of common sense and
senators sitting on big fat superannuation balances below and government pensions making rules about taxing unrealised gains.
I can not believe the comment that superannuation fund trustees are meant to ensure that they have sufficient liquidity. I agree that they do but only for reasonably known liabilities with some extra for the unknown.
How do you plan for a treasurer that has no ability to understand that taxing unrealised gains is just plain stupid. How does a farmer who buys land for farming in his superannuation fund which was worth $1m and then becomes worth $3m and after 2025 becomes worth $6m how do they find the money to pay this stupid tax?
If you are going to introduce draconian laws then why not give stamp duty and CGT concessions so that people can restructure their affairs.
Vote Liberal and put an end to this matter
The whole of this legislation reveals the inability of politicians to think KISS. Instead of this whole complex and ridiculous approach a simple progressive tax rate for superfunds could easily be implemented. Option A tax rate 15% for earnings up to a reasonable threshold (perhaps $150,000) with this threshold indexed, and 30% tax on earnings above the threshold. Option B tax of 20% with an exempt threshold to provide relief for smaller funds (say $37,500). I note both such options would not capture unrealised capital gains.
The issue with using the 90 day bank bill as the proxy is that not only will unrealised capital gains not be taxed, but effectively realised gains won’t be subject to the tax either. Obviously when I say issue it is not an issue for the taxpayer, rather the government and agreeing to the amendment.
An alternative is the 90 day rate plus a set premium and then you will have the situation where certain taxpayers will pay tax on more income than they actually received, realised or unrealised.
From the reporting of the submissions by the SMSF Association, Tax Institute, and joint submission by the accounting bodies I feel like only the Tax Institute grasped what the purpose of the consultation was. Their recommendations worked within the existing framework and tried to improve the inconsistencies, rather than advocating for an entirely different framework.