Login
SMSFA CEO tells Senate committee to re-engage with stakeholders
SMSF Association CEO Peter Burgess “encouraged” the government to cease the progress of the Better Targeted Superannuation Bill and continue to engage with stakeholders and industry to ensure that the resulting policy and legislation delivers the right outcomes.
In a speech to the Senate Economics Legislation Committee this week, Burgess said the SMSFA does not support the new tax on superannuation balances above $3 million, and stated the tax is based on a manufactured calculation of superannuation earnings that bears little resemblance to actual taxable earnings.
“Treating the increase in the value of an asset as taxable income is, by any measure, a radical departure from existing tax principles and a crude method of addressing super wealth and wealth inequality,” he said.
“It will give rise to many unintended consequences which we do not believe have been properly considered.”
Burgess said those impacted by the proposed tax, including individuals, small business operators and primary producers, will encounter liquidity stress compounded by the erratic and unpredictable nature of a tax that is linked to market movements.
“The assertion that a ‘commercial yield’ should always generate sufficient liquidity for the fund to cover a tax that is linked to movements in the underlying asset value, lacks commercial realism, particularly in rural Australia,” he said.
“SMSFs have historically been a strong source of venture capital. This is very unlikely to continue in an environment where unrealised capital gains are subject to tax.”
Further, he claimed that under the proposed manufactured calculation of earnings, complex adjustments will be needed to ensure earnings are not inflated or artificially reduced.
“A system of carried-forward tax losses will apply along with tax debt accounts for defined benefit funds. Some funds with defined benefit interests face additional valuation and pension reporting obligations,” he said.
“When the government first began floating the idea and need for this measure, reference was made to the small number of individuals with superannuation balances exceeding $50 million and $100 million. We agree that balances of this size are outside the original policy intent, but they are a consequence of historical policy settings.”
He continued that the existing policy framework is designed to address these balances and as a result, they are being progressively removed from the superannuation system.
“Despite the original stated objective of this policy, the proposed threshold has been struck at a considerably lower level. The shift from $100 million to $3 million, and a measure of earnings that captures unrealised capital gains, utterly reframe the policy position from one that targets ultra-high-net-wealth individuals to one that starts to capture elements of middle Australia, small business owners and farmers,” he said.
“It has very different policy intentions and outcomes. The lack of indexation of the threshold will, over time, see this measure impact many more average Australians.”
Unfortunately, it does appear that neither Treasury or the Senate Committee understand this legislation, but perhaps more likely that they do not care less about how this legislation affects those that will be affected, most egregiously and unfairly. The fact that they have not bothered to understand why a myriad of well-respected tax/finance and accounting bodies find this legislation flawed on so many levels, tells me that they do understand it but simply do not care. Both are of deep concern to me, living in what I thought was a democracy.
Where we stand in terms of legally if this progresses, given that neither party understand/care about the implications and given that we will have a precedent for double taxation and a new tax on unrealised capital gains for Australian residents if this goes through, is something that intrigues me. However, I guess that parliament just waves a magic wand and anything can happen - everyone should be on notice with this that this current government will lie its way through an election on any issue (remember, no changes to legislated Stage 3 Tax policy and no changes to superannuation). Further they will continue to lie their way all the way through to legislation of poor policy.
Sadly, even if this does get held up by some miracle of some politicians getting a conscience and admitting that there are gross issues with this formula, it is leaving insufficient time to move assets and change financial affairs before the trigger date of 30 June 2026.
After saving for almost 30 years in super both my partner and I moved past the $3m threshold, which now some 5 years later has almost tripled - almost all of which is unrealised capital gain. We will be paying sometimes more than the top personal rate of tax (based on the last 5 years of calculations) plus medicare (two of those 5 years), one year was almost 53% tax, but on average 40% tax over those 5 years - we both currently pay 30% averaged out over the thresholds. And then when we finally sell, we will be hit massively with CGT - the double-taxation issue.
We have no savings outside of super, so paying this extraordinary tax in our own names would mean that we have basically no money left after what is considered a very reasonable wage - not as high as politicians though.
We had self-funded our retirement, or so we thought. We will be liquidating much sooner because of cash-flow issues in paying this tax.
All personal calculations were offered to the Senate Committee. We find out shortly, if they bothered to understand this legislation or they simply don't care. The clue for them should be those respected organisations who time and again raised the same issues.
Treasury are either lying to the politicians or they are simple and do not understand their own formula, in which case they should not be providing advice to the government. In correspondence to me in response to my own letters, it is apparent that they do not understand the implications of their own formula. This is hugely concerning to me for obvious reasons. Should Treasury be overhauled? Surely someone with some sort of clout can see that we have huge issues here?
Thank you to everyone that has spent endless hours of their lives trying to fight this. I am well into cashing out of super if this goes ahead. We are now very happy to sell our business to retire and move on from this as best we can.
0
Subscribe to the
BULLETIN
Get the latest news and opinions delivered to your inbox each morning
Subscribe
