By focusing on a narrow aspect of the financial landscape, Treasury overlooks the vital connections between impacted superannuants, small business owners, primary producers, and angel investors. This oversight will disrupt the intricate balance of our economic ecosystem.
A commanding feature of Australia’s world-class superannuation system is its flexibility. Business owners and primary producers have, for many years, held their business premises or primary production land in an SMSF — to the tune of $100 billion. It has served them and the country well by spurring employment growth, investment, and innovation.
A deeply flawed feature of the proposed tax is its artificial construction and inflated measure of investment earnings that will be subject to this tax — a measure that inexplicably includes not just actual investment earnings but unrealised capital gains.
This has crippling implications not only for those superannuants directly impacted by this tax but for economic growth. It means that in some years, the amount of tax payable may exceed the investment earnings allocated to the superannuant’s account. The shortfall will need to be funded by cash reserves or by redeeming investments to provide the liquidity needed to pay the tax.
Cash flow is the lifeblood of small businesses and primary producers. We estimate about 17,000 SMSFs own a business premise – mostly family businesses and primary producers – will be directly impacted by this new tax. This number will only grow over time. Industry research also estimates that had this tax been in place for the 2023 financial year, the average additional tax payable by these superannuants would have been $50,000 – hardly a modest tax increase for a family business or primary producer.
Early-stage funding projects in healthcare, IT, agriculture technology, AI application, and biomedical research will also pay a heavy price if this tax proceeds in its current form. Being financially liable for an unrealised capital gain that is either years away from being realised or, as is often the case with such projects, never realised, will see this source of capital dry up. For superannuants with patient capital, this asset class will simply become “un-investable”.
Treasury’s analysis does not consider the impact on this vital source of funding. Around 14 per cent of total SMSF assets ($150 billion) are held in private/unlisted equities and unlisted unit trusts. To say this void will simply be filled by others lacks commercial realism.
Australia has always punched well above its weight in medical research and innovation. But this can only continue with funding — and at the seed level, that means, in no small part, SMSF money. This pool of capital, which has served this country well, deserves to be nurtured — not taxed at a higher rate.
It comes at a critical time when both the Business Council of Australia and the Tech Council of Australia advocate increasing Australia’s R&D. Any measure restricting this vital flow of funding is deeply worrying and runs counter to other Government R&D objectives aimed at unlocking economic growth.
It is inconceivable that during a period of stagnant economic growth, the Government is pursuing a contentious new tax on sectors crucial for driving productivity and innovation, while risking political capital on a policy with unintended consequences that could set a dangerous precedent for future tax reform.
It doesn’t need to be this way. There are other ways of addressing the nation’s stockpile of large superannuation balances that do not impose such a heavy toll on small business, innovation, and primary producers.
If the Prime Minister is genuine about pursuing economic reform, then this tax proposal, with its far-reaching implications and substantial burdens on key economic drivers, needs to be taken off the table.
Australia has championed smart, equitable policies that foster long-term growth. Let’s not compromise our future by undermining the foundations that make our superannuation system a global exemplar for short-term fiscal gains.
Unfortunately, its not just tax reform that’s required, we need to stop the bleeding from excessive waste of tax revenue and rorting of unsustainable social measures (did anyone notice so-called “stocking-filler gifts” listed on websites for NDIS recipients? Gifts like hammocks, expensive children’s toys etc?). This is just plain wrong!
Tax Reform should not include the taxing of PAPER profits. This is blatant Labor greed. Manage the economy better and there should be no need to steal the life-time retirement savings of hardworking Australians. Why is this government so hell bent on destroying aspiration? That’s a stupid question on my side. Of course, they want everyone on the public purse as it ensures they stay in power – power at all costs, including to the future of this country and the younger generations.
Albanese says he’s for hard-working Australians. But only it seems until they are deemed to be too successful at their hard work and sacrifice. Empty words. I guess that we can expect more lies too with an election around the corner.