Peter Burgess said the debate in the House of Representatives both on Wednesday and yesterday indicated there was a lot of concern over the unintended consequences of the legislation, especially for younger Australians and farmers.
During yesterday’s debate, which was adjourned twice, more MPs spoke against the bill and their concerns over the plan to tax unrealised gains and the absence of indexation.
LNP’s Garth Hamilton highlighted the impact the proposed legislation will have on the farming sector and accused the government of not listening to the concerns of the community.
“The government has been warned and refuses to listen,” he said.
Independent MP Kylea Tink on Wednesday put forward an amendment to the legislation recommending the $3 million threshold be indexed so as not to catch millions of younger Australians who in the future are likely to have super balances over this figure, and the removal of the provision that allows the government to tax unrealised gains.
“One of the purposes of indexing the superannuation cap would be to ensure each generation receives the same benefits and outcomes from the system,” she said.
“The lack of indexation is also incongruent with our current accepted tax principles and I do not understand why the government has, to this point in time, rejected the calls of many to introduce indexation in the legislation. And I fear the omission is deliberate and that the government is seeking to claw back more tax over time while claiming their initial policy affects few.”
Burgess said although there seemed to be a lot of support for the amendment to be included in the final legislation, he was not confident it would be passed by the lower house before the bill was debated in the Senate.
He was in Canberra yesterday again lobbying Senate crossbenchers in the hope that in the final Senate debate, there may be some changes made to the issues of indexation and taxing unrealised gains.
“This legislation will encounter the same opposition in the Senate as it has in the lower house,” he said.
“It will most probably be passed in the Lower House with no adjustment as the government has the numbers. But it was good to hear from those MPs that spoke out against it make reference to the research the SMSFA commissioned from the University of Adelaide about the unintended consequences of this legislation.”
Burgess said once it is passed through the House of Representatives, most probably by the end of this week, the bill will proceed to the Senate.
He added the government will be hoping to get the legislation passed by 30 June so it can be in force by 1 July 2025.
“The amendments that Kylea Tink has put forward on indexation are based on drafting we provided and also mentioned the deeming rate,” he said.
“It is important if any amendments do get through regarding deeming rates it has to be a close proxy for actual taxation earning, which we believe is no more than a 90-day bank rate – if it is any higher than that there will still be unintended consequences.”
You’re doing a great job pushing a large boulder uphill, Peter. Fingers crossed.
The fact that the Budget on Tuesday delivered $9.2m just to assist the “Commonwealth Superannuation Corporation and the Department of Finance to implement the tax for members under Commonwealth defined benefit superannuation schemes” is a real flag. Division 296 is so complicated in respect of defined benefit interests and here we have dollars allocated to prove that the “simple” formula doesn’t equate to simple implementation. Treasury rigidly claiming the objective of “sector neutrality” as the basis for being unmoved by any adjustments is clearly refuted. With this precedent, why then, can’t the fact that SMSFs also need adjustments (via Regulations) be allowed? The very big difference here is, any implementation costs will be born by the private sector – the SMSFs themselves. I would really doubt any SMSF that is in scope for this new tax would object to paying the fund administrator extra in order to get the tax base correct for this tax. Treasury and ATO during consultation said adding one label to the SMSF tax return costs upward of “$1m”. I don’t know how this can be the case but this seems to be their justification for not agreeing to the simplicity of allowing SMSF to have their share of taxable income as the tax base for Div 296.
APRA funds report member balances at close to net realisation value so they can launch the interest with short notice – member mobility is higher in large funds. This is the opposite to SMSFs where they are accounted for as their true entity – a trust – and “real time” reporting is not simple. If sector neutrality ever mattered (its impossible and why do we need it outside of the rules for contribution and pensions?), then SMSFs would have been reporting a closer value to net realisable each 30 June. The return would have had that overpriced (new) label added and each member would know exactly what was their components making up the 30 June balance. In any case, the tax allocation is worked out and added to member statement so a manual process of dividing that figure by 15% would give the practitioner the tax base to then work out Div 296 for a member. Really didn’t think the industry would have needed to get into the weeds with solutions here. It just leaves you feeling very despondent with the policy and law development capabilities of our system. I guess it is only when it is an area you work in that you realise the policy designers are infact exposed as wanting. The bigger disappointment is their stubbornness to listen (learn). The conclusion is that the political imperative and the associated slogans are the main game. The reality on the ground is secondary.