In the Senate Estimates on Wednesday (3 December) Senator James Paterson said according to the Parliamentary Budget Office, superannuation members who hold assets will now more likely keep them within the super environment rather than face capital gains tax on their sale.
“The package [legislation] is expected to raise about $2 billion over the forward estimates, compared to the previous gain of $6.2 billion that was under the original policy. The main thing that’s affecting that is the one-year delay in the commencement,” Sen Paterson said.
“The PBO has estimated that the difference in the revenue is much greater, that it’s to the tune of $15-and-a-half billion – the original policy would have collected $40.8 billion, and that the revised policy will collect $25.3 billion.”
Sen Paterson continued that Treasury has stated that the main revenue difference between the two versions of the tax is simply from a delayed start date, but he asked whether the department had also made any assumptions about behavioural change.
Dr Shane Johnson, first assistant secretary tax analysis division for Treasury, stated that excluding the LISTO change, the amended superannuation policies are expected to generate revenue of over $2 billion over its first year of operation.
“Anytime we do costing, we do look into potential behavioural changes. People can make a range of different behavioural changes to policies on the original policy. One expectation was that people would potentially take money out of superannuation and put it into assets outside superannuation. With this change in policy, we would expect, for example, a reversal, that kind of change.”
Johnson continued that as there will be fewer people affected by the legislation change, Treasury expects the impact would be less, especially with the removal of the taxing of unreaslised gains.
“One of the behavioural aspects [we expect] is that people may not sell assets within superannuation so that the gain is never realised,” he said.
“They are typically a very small proportion of assets in superannuation funds. In fact, the majority of funds actually have quite a diversified portfolio and many factors will influence people when they will realise [capital gains].”
Sen Paterson said that subsequently this behavioural change could then allow people legally to limit paying the tax by not selling assets in their fund.
“Now potentially, depending on how many assets I have in my superannuation, I’m facing a tax of up to 40 per cent which I didn’t face before. That’s a pretty powerful incentive to not sell an asset, isn’t it?” he said.
“I’ve never before been charged 40 per cent in my SMSF, have I? No, but that’s a new tax which is being introduced to resolve this. Was there ever a headline 40 per cent tax before in super? Prior to the announcement of these changes, there was no taxation rate of 40 per cent in superannuation and these changes will introduce that for the first time.”
Diane Brown, deputy secretary, revenue group for Treasury, said the costings from considered the range of assets in a portfolio.
“We did look at some behavioural assumptions. We would look at the more material behavioural assumptions, and as Dr Johnson said, housing is a very small proportion of the portfolio, even real property is not a particularly significant part of the holdings,” Brown said.
“And then there’s a range of reasons, not just tax, for why people will decide to dispose of assets.”
