Crossbench support for $3m super tax ‘certainly not guaranteed’: Burgess

On the back of the teal independent MPs releasing a joint statement calling for “urgent amendments” to the Better Targeted Superannuation Concessions Bill, SMSF Association chief executive Peter Burgess told SMSF Adviser the government is also facing roadblocks in the Senate.

“Based on our discussions with the Senate crossbenchers, and we’ve met with seven of the nine, there is growing concern about the unintended consequences, in particular taxing unrealised capital gains,” Burgess said.

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“As it stands, their support for this bill is certainly not guaranteed.”

He reiterated the SMSF Association’s concerns about how the government is attempting to “claw back tax concessions for people with large balances”.

“All we’re asking for is an opportunity to be heard, to look at alternative ways, because as we said, there are other ways in which this can be done,” Burgess told SMSF Adviser.

“We’ve proposed some amendments to this bill using a proxy for actual taxable earnings, because we’ve been saying this for a while, but if we’re going to have a tax on earnings, the only way you can take out the taxing of unrealised gains is to use actual taxable earnings.

“We have been told that’s not possible because some of the larger funds can’t track actual taxable earnings down at the member level, and Treasury is keen on using the same approach across all funds. That’s why we’re saying if that’s not possible, then use a proxy for actual taxable earnings, and we’ve proposed the 90-day bank bill rate as being the proxy.”

In the joint statement, member for Wentworth Allegra Spender said “taxing unrealised gains is just bad policy”, while also noting the calculation problems do not extend to SMSFs.

“It appears this is a policy fudge to accommodate technical limitations in large APRA-regulated funds when the overwhelming majority of these high balances are in self-managed super funds that could easily calculate their actual earnings and associated tax,” Spender said.

Responding to this, Burgess said the point is “starting to get a bit more traction”.

“It’s just not fair that we’re designing a system to suit the large funds when the vast majority of members impacted will be self-managed super fund members,” he explained.

“It’s inappropriate that we’re building a system that way. The amendment we’re asking for, essentially, is if you can use for those funds that cannot identify actual taxable earnings, let them do it, and let them base the tax on that. Those that can’t will then use the proxy rate for those earnings.”

What impact will the teals make?

While the teal independents have made strong statements against the current construction of the Better Targeted Superannuation Concessions Bill, they wield little power to sway the vote given the government’s majority in the lower house.

However, according to Burgess, the MPs highlighting their issues with the bill can still influence the Senate crossbench.

“Whilst, yes, the teals are in the lower house and they don’t have the numbers, we know they do work together with members of the Senate crossbench,” he said.

“We know that Allegra Spender is working with David Pocock on this bill. So, they don’t have the numbers in the lower house, but they do have some influence over the independents in the Senate.

“Once it gets to the Senate, the government is going to need the support of the Greens, and there’s nine crossbenchers, they’re going to need three. Right now, it’s not certain that they have the votes that they need to get this bill through.”

The bill did not make an appearance during the first sitting week of Parliament following its winter break, and Burgess said it is still unclear whether it will be scheduled for next week.

“I would say that if it’s not listed next week, then I think that’s a pretty good sign that some negotiations are going on to try and expediate the passage of this bill when it finally does get debated again,” he added.