Super tax ‘elephant in the room’ at upcoming roundtable
Financial and superannuation industry associations may not have a seat at the economic roundtable next month, but they are already preparing submissions in the continued fight against the draft $3 million super tax legislation.
On Tuesday, ACTU secretary Sally McManus, one of the invited attendees to the roundtable, said she believed the government should index the proposed tax.
McManus said she believes the tax should be indexed “because you've got to make sure eventually people don't end up there”.
“But that's a very long time in the future. Super isn't there to be a tax fraud. It's there to make sure you've got a dignified retirement,” she said.
“I think that it does need to be indexed so I do support what [Paul Keating] is saying, but I don't think there's some urgent need to do so right now.”
Peter Burgess, chief executive of the SMSF Association, said the association is making a submission to the roundtable and intends to focus on the importance of fulsome consultation and due process when considering alternative tax proposals.
“The Division 296 debacle is an example of policy design on the run and how poorly designed tax policy can stifle business investment, innovation, and access to capital,” Burgess told SMSF Adviser.
“This could have easily been avoided with genuine industry consultation and proper consideration of alternatives including the option of allowing SMSFs to use actual taxable earnings – an option that was clearly dismissed without due process.”
The Financial Services Council said it will also be making a submission to the roundtable.
“The FSC supports the Treasurer’s commitment to making productivity a top priority, but the financial services sector must be part of the conversation,” it said in a statement to SMSF Adviser.
“Financial services should not be overlooked in national productivity debates. To truly lift Australia’s productivity, the government must leverage the full potential of this sector that is well placed to contribute to greater national productivity gains.”
The statement continued that tax reform offers the most significant opportunity to generate a step change in Australia’s rate of productivity growth.
“The FSC would like to see a broad-ranging and evidence-based tax review, to identify opportunities to generate economic growth in Australia. This will bring an end to the constant tinkering with superannuation taxes that undermines confidence in our retirement system, such as the government’s ill-conceived $3 million tax,” it continued.
The FSC said it has identified several reforms that could boost productivity in the financial services industry by at least $800 million a year.
“These include revenue neutral tax measures to make Australia a competitive destination for global funds management businesses, allowing rationalisation of outdated superannuation and funds management products so companies can finally retire costly legacy IT systems without hitting customers with massive tax penalties,” it said.
Other measures include removing Foreign Investment Review Board fees and administrative costs for safe investments from trusted jurisdictions, simplifying reporting requirements under the breach reporting regime, and reining in the cost blow out of the Compensation Scheme of Last Resort.
Natasha Panagis, head of technical services for the Institute of Financial Professionals Australia, said that although the association is not invited to the economic reform roundtable, it too will be making a formal submission.
“As the representative body for professionals in tax, superannuation and financial advice, IFPA will be urging the government to include meaningful tax reform as part of its broader productivity agenda, along with a comprehensive review of the superannuation system,” Panagis said.
“While we support the need for a sustainable superannuation framework, we believe the Division 296 tax measure – designed to limit concessions for large balances – should be scrapped. If the intent is to reduce tax concessions for high-balance members, there are better, more effective options that deserve consideration.
“Rather than introducing yet another piecemeal change, we’re calling for a holistic review of superannuation tax concessions to ensure the system remains fair, equitable, and fit for purpose.”
Panagis continued that many of the alternative policy options will require further analysis and design work, and IFPA would welcome the opportunity to provide input on these and other related reforms.
“Ultimately, constant, ad hoc changes to super not only undermine confidence and stability in the system but risk discouraging long-term investment in retirement savings,” she added.
The Council of Small Business Organisations Australia (COSBOA) has been invited to attend the roundtable and has been a vocal opponent of the taxing of unrealised gains and the impact it will have on many of its members who have an SMSF as part of their small business structure.
Luke Achterstraat, chief executive of COSBOA, said the Labor government has a problem when even the ACTU is publicly panning its policy.
“That might just be the canary down the mine when the ACTU is openly panning the Treasurer's flagship tax policy,” Achterstraat said.
“Our approach to the round table will be on red tape reduction, but also beyond productivity, you can't have this conversation without tax reform. We will certainly be calling for simplification of the tax system, reducing company tax, particularly for small business, and making the instant asset write off permanent.
“And of course, we feel the taxing of unrealised capital gains and the super tax policy is bad for a number of reasons, predominantly from a small business perspective.”
Achterstraat said a lot of small businesses, whether they're family businesses or farming businesses, have their premises tied up in SMSFs, a strategy they have been encouraged to implement.
“That asset would be leased to children to run that business, so it's an essential part of small business and succession planning and the taxing of unrealised capital gains is going to have a massive negative impact and potentially be creating a tax liability for businesses that simply don't have that cash flow,” he said.
“The issue will certainly be the elephant in the room at the roundtable. I think the Treasurer would be wise to try to deal with it in advance.”
Simon Grant, CA ANZ group executive for advocacy, said the CA ANZ has been paying close attention to the productivity debate since it was firmly put on the agenda the day after the Albanese government was re-elected.
“We are answering the call for submissions to help inform the discussions that will take place at the August Productivity Roundtable,” Grant said.
“We’re also engaging with relevant stakeholders to look for opportunities of broad alignment across the profession and business community.”
He said CA ANZ advocates on a range of subject matters, including tax, superannuation and digital reporting.
“Tax reform is an important part of boosting productivity – and it’s the right step forward to have it on the table. As part of this debate, the country should consider harmonising how our state and federal taxes work together, to boost efficiency and equity across the board,” he said.
“Our advocacy on the design flaws of the Better Targeted Superannuation Tax Concessions Bill began when it was announced in 2023. CA ANZ does not support the taxing of unrealised gains and has also raised concerns about the $3 million threshold not being indexed, meaning it will impact more people in the future.
“We’ve participated in every consultation opportunity available on this policy, which includes making submissions to Treasury and the Senate economics committee. However, if the bill is passed, following the August discussions, we will work with the government to ensure the policy is implemented as best as possible, now and in the future.”