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Industry questions why super tax dropped from debate again

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By Keeli Cambourne
July 05 2024
3 minute read
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Speculation is growing that the government may be rethinking its approach to the controversial $3 million super tax legislation after it was dropped from the House of Representatives schedule for a second week running.

Following a barrage of media attention from the mainstream media in the past two weeks questioning the government’s plan to tax unrealised gains, the bill is not likely to be debated until the next parliamentary sitting days beginning on 12 August at the earliest.

Peter Burgess, SMSF Association CEO, said the association has opposed this legislation from the outset due to its poor design.

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“Not indexing the $3 million threshold and taxing unrealised capital gains is a crude and grossly unfair way of addressing super wealth inequality. The consequences for the SMSF sector and the flow-on effect to the small business sector, farmers, and venture capitalists, are significant,” he told SMSF Adviser.

“The impact on future tax policy should also not be underestimated. This is why we have been fighting so hard in Canberra for sensible changes to the proposed legislation.”

He said the association’s advocacy efforts commenced more than 12 months ago and have involved regular visits to Canberra and many meetings with members of parliament, including independent members from the Lower House and the Senate.

“Throughout this time, we have been encouraged by the interest they have shown in this proposed legislation and the concerns we have raised. We have drafted amendments to index the cap and to reduce the severity of this new tax and have had success with some of these amendments being moved in the Lower House,” he said.

“The Government has the numbers in the Lower House to pass the Bill without amendment but, to secure passage through both houses of parliament, there is still the possibility of amendments being made. While this possibility exists, we intend to keep pushing for sensible amendments.”

Aaron Dunn, CEO of Smarter SMSF, said he believes there is a lot of backroom number crunching following the resignation of Senator Fatima Payman from the Labor Party, especially if she decides to join the crossbench.

“She may have a different view on this legislation than the party line, and now the government will need to make sure it has the numbers it needs to get it through,” Dunn said.

Dunn said the work of the SMSF Association in lobbying the crossbench over the past six months has impacted discussions around the legislation and the association’s influence in the debate is now being felt.

“The reality is, that even if the bill did get its third reading this week it wouldn’t have gone through to the Senate until the next sitting days,” Dunn said.

“And now that it has been pushed further down the road, it is going to create even more problems because there is going to be less time to see what ultimately transpires.”

He continued that the work of the SMSFA has been exemplary in “articulating the mechanism” of taxing unrealised gains and highlighting its flaws.

“Historically, this kind of technical messaging has not wanted to be heard, but it seems that the government, although not wanting to go back to the drawing board, may be reconsidering its position if it wants to secure the numbers for this bill to be passed,” he said.

“The most important thing the SMSFA has done is say that it is not arguing that there shouldn’t be an additional tax that goes towards sustainability and concessions that sits within the objective of super, but that it feels, as it did with the NALI/E rules, that if you can’t calculate the actual tax then apply that, as the SMSF sector can do, then an arbitrary calculation like the proposed one on unrealised gains, should not be used.”

He said the SMSFA has had to strategically work out how could get the best outcome given that the challenge until now has been how to get heard within Canberra.

“That has changed over time since this proposal was first introduced in 2023, and the association has worked hard to get to the position it is now where it is being heard,” he said.

Shelley Banton, head of education for ASF Audits, said there is no doubt that the advocacy efforts of the SMSFA are being heard clearly in Canberra.

“I think it indicates how concerned the Senate crossbench is and sends a strong signal that an early election could be called, given the bill will automatically lapse on the dissolution of parliament,” Banton said.

Meg Heffron, director of Heffron, said in terms of its design, the proposal is probably one of the most controversial taxes she has seen in years.

“If this really is a sign of the government reconsidering the current approach, I will be incredibly pleased,” she said.

“The government is perfectly within its rights to want to reduce super tax concessions for those with very high balances but it has to do it in a better way than this tax. I can’t believe they kicked such an own goal by prioritising simplicity for large funds over actual fairness to the individuals who will be paying the tax.”

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