Minister for small business Julie Collins has responded to concerns raised by the National Farmers’ Federation that the new proposed tax for superannuation balances above $3 million would raise liquidity concerns for farms.
National Farmers’ Federation deputy CEO, Charles Thomas said the farm sector has consistently flagged that this bill will leave farmers in a terrible situation where they may have to sell their assets out from under the next generation.
Thomas added the idea of taxing farmers for fluctuations in the property market is an absurd precedent that has no place in Australia’s tax system.
Council of Small Business Organisations Australia CEO, Luke Achterstraat, said the same issues apply to small and family business owners.
This new tax on the unrealised gains on assets held in the SMSF may see an increased obligation that represents a significant proportion of an owner’s annual income, or even exceed it.”
He also said the proposed tax would see farmers left in a “terrible situation” where they may have to sell their assets to meet the new tax obligation or increase lease rates to their children so much that their children’s business may become unviable.
Responding to the concerns raised by the NFF and the Council of Small Business Organisations Australia, stating that all super funds should already have sufficient liquidity to meet potential liabilities.
“As I stated in the Parliament, it is already a principle of Australia’s superannuation system that funds have sufficient liquidity to meet existing or prospective liabilities,” Collins said in a response provided to Accountants Daily.
“This is not a new feature of our superannuation system, and any commentary suggesting otherwise is misleading and wrong.”
Thomas also said SMSFs are a common tool for small businesses to manage assets and business succession.
“In the case of agriculture, older farmers will often hold their assets in an SMSF and lease the operations to their children, providing both retirement income for them as well as an opportunity for the next generation to start farming.”
“In evidence provided to the Senate economics committee inquiry into the bill by the SMSF Association, it was estimated that over SMSF 17,000 accounts in 2021-22 held farming land.
“More than 3,500 of those will be immediately impacted by the new tax, and substantially more are likely to be captured in the coming years. Additionally, it was estimated that there are 13,000 SMSFs holding business real property who will be impacted by this tax.”
***Correction*** An earlier version of this story incorrectly quoted Minister Julie Collins as stating the superannuation taxes would cause liquidity issues for faming businesses, potentially driving the sales of these business.
Added to my last comment: And this is why lying Chalmers also wants access to the Future Fund – the government has run out of money for their pet projects. SMSF funds and the Future Funds are just too tempting.
Note to government – do what your constituents all have to do – stay within budget and do not spend more than you have or can afford to pay back in terms of interest on loans. And leave something in the kitty for a rainy day because those days inevitably come.
Simply put, increase productivity and stop spending money that you don’t have.
So the minister is quoted as saying: “As I stated in the Parliament, it is already a principle of Australia’s superannuation system that funds have sufficient liquidity to meet existing or prospective liabilities,” Collins said in a response provided to Accountants Daily.
Who would be expected to know that we will be forced to pay in many cases up to 3 or even 4 times more tax than the current 15% tax on super (due to definition of Earnings to encompass tax on paper profits too). This is significantly higher than personal tax rates, and apparently there are some instances out there where in some very recent yours this would have amounted to up to 70% tax on the “Taxable Income” definition.
I don’t have a crystal ball for keeping aside this kind of liquidity. It appears that this government is intent on making this legal, such as any socialist/communist government would do. Then its a law and so be it – you have to pay it. I have no assets outside of my home and superannuation to pay this kind of tax, so it has to come out of my superannuation. This is purely and simply theft, and follows the big Labor LIES to the Australian people.
I just came across this in an article:
“The problem with socialism is that you eventually run out of other people’s money.” This famous line by former British Prime Minister Margaret Thatcher reminds us that while government handouts may sound good, someone still has to foot the bill. https://hudson.house.gov/media/enewsletters/the-problem-with-socialism
The whole concept of taxing unrealised capital gains anywhere is ludicrous.
What doesn’t seem to be understood is it may be necessary to crystalise previously unrealised gains to pay the proposed tax, which in itself is entirely counter intuitive to anything other than destroying wealth of all sorts at all levels.
Additionally, it will create both legal and tax precedents that can then be applied to other tax environments.
Once precedents exist allowing unrealised capital gains to be taxed in super, my concern is that it won’t take long for the precedent to be applied to any other asset with unrealised capital gains attached.
There was some sort of brief announcement that the Coalition would repeal this irrational and inappropriate legislation, but recently just silence. Perhaps they have gone silent awaiting the announcement of a date for the 2025 election. Then the campaign will start and the proposed repeal be confirmed. Thus Anthony becomes the Drovers Dog #2 and disappears into the oblivion of being a dumb loser.
If Minister Collins has any integrity after her admission, she should cross the floor and oppose the Bill and take a few colleagues with her.
What no one in the Labor Party seems to realise – is that if the farmer/business owner DOES have to sell the asset – why would they leave it in the SMSF environment? Everyone I have spoken to has reasoned that if they are forced to sell, they will then withdraw the money from the SMSF and divide amongst the children. Or – if there are no children – make their donations to their Will recipients earlier.
You simply cannot tax something that does not exist – which is what this tax is aiming to do. Forward estimates apparently have factored the “windfall” into their budgets – which is ridiculous considering 1. the law hasn’t passed and 2. there won’t be anything to tax!
If these Canberra muppets just said, 15% (max tax on excess over the threshold) on INCOME, not unrealised gains and indexed the $3m to…. I don’t know …. some multiple of the CC level perhaps as we already index that??? almost everyone would probably say yeah fine. But no, these knuckle heads keep persisting with a proposal that was objected to by every single professional association and every adviser no matter their discipline.
Pity is that the Treasurer, Jim Chalmers, the Assistant Treasurer Steven Jones and the Labor government as a whole, do not care about how this will affect aspirational, everyday hardworking Australians. They have shown this repeatedly in their nonchalant attitude when queried on the egregious nature of this tax and keep pointing to the SMSFs that have in excess of $100m or $50m in super to justify their targets on those holding over $3m in the SMSF (which is not worth much in Sydney for starters).
This tax is not equitable or fair. It is not the Australian way. It is purely and simply theft of life-time savings and the result of a massive lie to the people of Australia that voted them in at last election.
No changes to Superannuation they said. No changes to capital gains tax they are currently saying. Well, what do they call the introduction of a tax on the unrealised capital gains on paper profits? With no chance of recovery of any tax credits in most cases and on and on goes the list of complaints by very well-respected tax, superannuation, legal and financial institutions.
And they lie to say that taxing unrealised capital gains like this is not unusual. These guys are having us on and need to be called out for it.
And by letting this ridiculaous formula get this far down the track with nary any changes to it is a brilliant example of the contempt with which they hold aspirational, hardworking Australians and the utter misery they are inflicting on us and our families by keeping this issue alive.
Everyone is focused on the farmers, and it is fortunate for the SMSF industry that this argument has cut through. The same argument applies for any small business owner who operates a business from a property owned by their SMSF. That could be a shop, a restaurant, a factory, a warehouse, an office.
In some cases this would be extremely inconvenient and costly. In other cases (think a shop or restaurant reliant on location), it could spell the end of the business.
Well, finally they have admitted they have their hands in the cookie jar! How long does it take these people to pick up on simple concepts? You might also check out what the US Senate said about the same thing at:https://youtube.com/shorts/b6s8wtx8gbY?si=bRk4-1AprBpf7x-Y