Peter Burgess, SMSFA CEO, was due to fly to Canberra this morning for a scheduled meeting with Tasmanian Senator Jacqui Lambie.
“The point we will make to Ms Lambie is that when we have met with other members of the crossbench, they have spoken about how this is a most egregious tax and we hope that she will be receptive to our concerns,” Burgess told SMSF Adviser.
“It’s only as the bill gets closer to the Senate that we have been able to set up this meeting, and we hope she will be receptive to our concerns. We know that this legislation will have a big impact on farmers and she has many farmers in her electorate. We are hopeful she will see the unintended consequence of the taxing of unrealised gains, something that no other pension system in the world does.”
Burgess said he has also heard that Independent Member for North Sydney, Kylea Tink, would put forward an amendment to index the cap.
“While the government has the numbers in the lower house we don’t expect to see any changes to the bill before it goes to the Senate,” Burgess said.
“But off the back of the Senate inquiry into the $3 million cap, it was noted that the Greens had said they would not support the cap unless it was reduced to $2 million and indexed and that the use of LRBAs also be banned.”
He added there have been rumours that some independent MPs would like to see a clawback position included in the bill, which would mean that in a negative income year, funds could claw back some of the tax paid in the previous year.
“That would require some substantial amendments and it is only rumoured at the moment, but it has been feted by some independents,” he said.
Burgess said it is more than likely the bill will not be in the Senate until next week at the earliest, and added the SMSFA is hoping the crossbenchers will be able to force some amendments through.
“It’s fair to say the members of the senate crossbench are concerned about the two most outrageous aspects of this legislation – the taxing of unrealised gains and the lack of indexation,” he said.
Although it is unlikely the legislation will be passed by 30 June as the government had planned, Burgess reminded SMSF trustees that the impact of the new tax will not be tested until 2026.
“It is certainly a controversial bill and we saw that when it was debated a few weeks ago with a number of politicians voicing their concern,” he said.
“It is not as straightforward as the government thought it could be, and if they have to make amendments it will delay the process even more.”
Monday April 7th.
Given that super balances at 30th June are going to very depressed thanks to Mr Trump, if the new Div 296 passes, it will have a very nasty immediate impact in that if and when the market recovers to pre Trump values, that “recovery” will be treated as an unrealised gain , and if 296 applies, will be taxed. How can anyone possibly argue that this sum is a gain, let alone realised. It’s just obscene. If they want to penalise larger balances, why not just a higher rate on realised income above a realistic base income(indexed). Maybe members can only apply a base exemption notice to their funds that total the maximum base income….like payg type of system….that way having multiple industry funds should be able to modify their systems to cope.
Trevor – you got it! Its OBSCENE!
Everything about this proposal is obscene. Few care as it doesn’t affect most, for now anyhow.
When this was proposed, the TBC was $1.7m. It is going to be $2m from July 1st assuming no government intervention to stop this. But the $3m won’t be indexed.
$3m in Sydney may be enough in some states, but not in Sydney.
I just wish that people would wake up. Do the maths. It can be as simple as multiplying your current financial needs by 25. $3m at the moment will give you an income in today’s dollars of $120k. Is this enough for you to live on without working? If so, great – you need to have $3m in savings and increase it along the way each year by multiplying your needs by 25.
I know that this is an oversimplification, but it helps establish some sort of baseline. Don’t listen to leftist institutions. You will be left destitute and wholly at the whim of the government for a pension for your golden years.
But, the government can always steal more from those that are deemed to have too much. This is what this tax is all about. Why are we not hearing anything about this anymore? We need to hear from the independents please on whether or not they will support this if Labor/Green coalition gets in. The Labor party has not abandoned it as Chalmers has stated that he is still wanting this to pass and it is budgeted for in the March budget just gone.
There are so many issues withe this tax. It is beyond me how it has got this far. It is not going to be left behind by Labor – Chalmers has said as much. A friendly Senate gets this through unchanged.
Since all the numbers for our SMSF are available I did a mock calculation to see how div 296 would affect our tax liability if it were applied in FY24. The result was that an estimated tax refund of about $37K (due to franking credits) would turn into an estimated tax liability of about $25k. The $62k turnaround is entirely due to div 296 tax and would represent a tax increase of 140% this financial year.
The liability arises mostly because the value of some bank shares is still recovering from its post COVID slump. The kicker is that the share price is still about 35% below its pre GFC high so anyone who purchased then is still nursing a capital loss. Notwithstanding that it appears that div 296 tax will still need to be paid on what is only a partial “recovery” of a long term loss. The design of the new tax appears to me to be particularly poorly designed not only because it proposes to capture unrealized gains but also because it will also capture recovery of unrealized losses such as in the situation described above.
While I broadly support reforms that make taxes more fair and equitable the div 296 tax in its current form does not appear to be fair or equitable particularly since capital gains tax will still need to paid when the shares are eventually sold. Moreover the notion of paying tax on the recovery of a loss is bizarre to say the least.
The debate around introducing the new tax started with outrage by various government stooges that there were people that had accumulated north of $100m in their super accounts (outrage that people had north of 3m or even 5m would not have been nearly outrageous enough to get traction). Once the outrage got traction it was easy to set the threshold to any arbitrary level. Our best hope to get rid of this ridiculous tax on what are relatively modest balances (relative to 100m or more) is to hope that the senate does something sensible to prevent taxation of unrealized gains.
They have made a separate set of rules to cover defined benefits schemes ie politicians. Why not a separate set of rules to cover SMSFs? Obviously union run industry funds want to rid the system of SMSFs as any fund member with a large balance would look to set up their own SMSF. Talk about political posturing!
Its also not fair keeping us in limbo for so long. I feel unable to move substantial cash into better investment vehicles since this was announced in case I have to start moving assets out quickly. I don’t even feel confident moving it into higher interest term deposits. I would have preferred to invest some of these funds into something else other than cash. My SMSF is suffering financially and so is the government in the tax it would have gained. The banks are winning out so far on my end. 16 months now and counting.
Not to speak of the lost productivity in fighting this and working out what to do if it comes to fruition. The lawyers are winning on that front.
Except, Tony, that some of the big funds say that they do not have the software in place to give individual members their Taxable Income component, hence this convoluted, egregious tax, which seems simple but is fraught with many inconsistencies and inequality.
I understand that indeed, most large super funds can give this information, so the government is pandering to those that don’t have the capacity. It would be interesting to see if there is a conflict of interest here with the Labor party and those superannuation funds.
As to the article itself, I doubt that the government would be in a healthy financial position to have to reimburse mostly SMSF members in years where there is negative capital gains. They will already have spent these funds raided from largely SMSF member accounts.
I do doubt however that there will be anything like $2b a year to raid as those that can will have moved assets, and why wouldn’t they. The government wastes enough of the tax revenue paid largely by this same cohort of individuals without giving them more to waste.
I personally believe that if the government just waited for more baby boomers to retire, they would gain from the changes already made by the Liberal government a few years ago with the TBC legislation.
Unrealized is a nightmare .Having just signed off. 74 pages of 23 financials/tax schedules etc ,we’ll end up at 100 in a heart beat !!!
These politicians are now treating super and this new tax as a toy that they are having a play date with. Don’t agree with it personally but if it cannot be avoided why can we not simplify the treatment. Extra 15% on income on the % portion over the 3 million, not unrealised gains nonsense and index it like everything else is.