Peter Burgess, chief executive of the SMSF Association, said a critical flaw in the proposed tax is its calculation of investment earnings, which inexplicably includes unrealised capital gains, penalising SMSF members for paper profits that may never materialise.
“No one disputes Treasury’s desire for a fair and equitable superannuation system, but to claim this tax only affects a minority and serves the national interest is shortsighted. It ignores the broader ripple effects,” Burgess said.
“The government’s narrow focus is blind to the vital connections between superannuants, small business owners, primary producers, and angel investors. This oversight is already destabilising the SMSF sector and threatens to disrupt the delicate balance of our economic ecosystem.”
Burgess also pointed to the findings of the Productivity Commission’s 2018 inquiry report, Superannuation: Assessing Efficiency and Competitiveness, which emphasised the need for greater competition in the superannuation sector to drive better outcomes for members and the important role played by the SMSF sector.
“The government is actively undermining competition by hitting SMSFs — one of the few genuinely competitive parts of the superannuation market — with a tax designed to accommodate large superannuation funds,” he said.
He emphasised that a defining feature of Australia’s super system is its flexibility and said business owners and primary producers have long held their business premises or farmland in SMSFs — around $100 billion worth.
He noted the sector has also been a cornerstone for employment, investment, and innovation.
“That cash flow is the lifeblood of small businesses and primary producers. We estimate around 17,000 SMSFs own business premises — mostly family businesses and primary producers — who will be hit hard by this tax,” Burgess said.
“Industry research estimates that if this tax had been in place during the 2023 financial year, the average additional tax payable by these superannuants would have been $50,000. That’s not a modest impost for a family business or a primary producer.”
Early-stage funding projects in healthcare, IT, ag-tech, AI, and biomedical research would pay a heavy price.
“To be taxed on an unrealised capital gain — potentially years from being realised, if at all — will dry up this critical source of capital,” he said.
Burgess criticised Treasury’s impact analysis for ignoring the hit to private and unlisted equities, which make up 14 per cent of SMSF assets, at about $150 billion.
“To say this void will simply be filled by others is misguided and commercially unrealistic.”
“The Productivity Commission has been clear: competition drives better outcomes in superannuation. This tax does the opposite. It punishes SMSFs, stifles innovation, and consolidates market power in the hands of large superannuation funds. If the government is serious about fostering competition, aspiration and fairness, it needs to rethink this policy.”
Paul Keating may be remembered as the architect of Australia’s superannuation system, but Jim Chalmmers will be remembered as its demolition man.
Image the grief for a person who had $10 million in a fund in 2020 consisting of Mineral Resources and Pilbera Minerals. The portfolio would be down below $2 million now, but if lithium goes back the portfolio could go back to $10 million. 15% tax on $7million.
Then you have to sell $1,050,000 worth of shares to pay the tax and there may be Capital Gains Tax to pay at an effective tax rate of 30% on top of the Unrealised Capital Gains Tax Paid.
Sounds like a diversification issue Rob. Or otherwise a far-flung hypothetical to get in the way of a sensible tax.
Either way – my sympathies for the now only ~$9m balance owner.
That’s nothing else to say. Thank you Peter. Appreciate the effort but I’m not confident the bone heads will listen.