Spender has been campaigning against the proposed legislation since its inception two years ago and led the charge of opposition in the Lower House during the government’s last term of office.
“I think this is bad for Labor. The ability to run scare campaigns on taxation of unrealised gains means if they pursue this, their credibility will be gone in the next election,” Spender said.
“[The issue] was a bit under the radar during this campaign, but I don’t think it will be next time.”
With the government now holding a majority in the House of Representatives, Spender said the fight against the tax will most likely come down to public momentum rather than political opposition.
“There needs to be a big education campaign to let the public understand that with the lack of indexation, this tax is going to affect many more people than the government suggests,” she said.
“The majority of people who have raised this with me are people who either have large superannuation balances themselves, work in finance or who have a business that is part of their superannuation – not everyday Australians.
“I remember speaking to a group of young guys at Bronte who had literally come straight out of the surf, who were all in the start-up sector. I told them that one of the things I was fighting against was the taxation of unrealised gains. They weren’t aware of it. It wasn’t something that was on their radar.”
Spender said she was most passionate about the tech and start-up sectors regarding the impact of taxing unrealised capital gains.
She said she believes the government “genuinely wants to pursue a high productivity”, but the Division 296 tax will hamper investment in the sector and drive innovation offshore.
On Friday, Cbus chairman and Labor Party president Wayne Swan dismissed concerns from the venture capital sector that the proposed super tax would deter investment, especially from SMSFs.
Appearing on Nine’s Today program, he said SMSFs were used by millionaires as tax avoidance vehicles and supported the government’s plan to tighten tax breaks.
“The fact is that superannuation tax concessions are there for people to have a dignified retirement,” Swan said.
“They’re not funds where you squirrel away tens of millions of dollars.
“So, the government shouldn’t be giving concessions to people who have many millions of dollars squirrelled away well before retirement to engage in other investment activities.”
Spender said one of the issues that needs addressing is the argument from APRA-regulated funds that the calculations involved in the proposal are too difficult to apply across thousands of member funds, but which is expected to be undertaken by those who have SMSFs.
“We need to call out that argument because as I’ve said before, if the tax was on realised gains, those funds that said they couldn’t do it would definitely want to start calculating realised gains,” she said.
“It’s not appropriate to put forward bad policy just on the basis that some people can’t deal with it.”
Spender continued that it will be an uphill battle to make changes to the legislation in the Senate and with new leaders fronting the Coalition and the Greens, there is also an element of the unknown with which to contend.
New Greens leader Larissa Waters announced on Friday that the party will keep pushing its demands to lower the $3 million threshold to $2 million if the government wants to push the legislation through the Senate.
“Our position is that it should be a $2 million threshold and that wouldn’t impact that many extra people,” Waters said.
Spender said the push should now be to get the Greens to recognise that the taxation of unrealised gains is “a bad idea”.
“The Coalition voted against this bill but failed to engage when the crossbench was trying to reach a compromise – they abstained on Kylea Tink’s amendment that would see the threshold indexed. If it wasn’t for the crossbench in the house and Senate, this would have been law last year,” she said.
Spender added that although she understands the crossbench is not as powerful as it was last term, and ultimately the government does not have to listen to the concerns of independents, it would be in the government’s best interest to do so.
“They don’t have to listen to [independents] but the point is that it’s in their interest, because bad policy is bad policy, and the impact of that policy will become clear over time.”
There are too many complicated scenarios that cannot be addressed because money has to be found to pay tax on a change in value situation where no money was realised. Taxes are more appropriately timed to arise where there is an asset sale. There is a true valuation to market and there is cash available to pay the tax.
What is the actuarial value of Wayne Swans indexed pension? Well above $3M without doubt, and will it be taxed? Meanwhile adding further to his wealth via generous directors fees….very much a case of I’ve got my lot sorted, never mind the rest.
It’s clear that Labor have it in for the SMSF sector.
Can someone ask Wayne Swan to explain in detail how millionaires are using their SMSF to avoid paying tax? Just because someone has done the responsible thing and put money into their SMSF and chosen their investments wisely, in the hope that they won’t be reliant or dependent on the government, does not mean they are using the vehicle as a tax avoidance scheme.
Perhaps Wayne Swan has forgotten that non-concessional contributions are prohibited for those with a total super balance of $1.9m, and that the only way to get additional money into super would be to max out the concessional contribution limit of $30k and avoiding Div293 if possible.
If the argument is that investments held outside the fund would be liable for more tax, then why not allow those with $3m or more in super under preservation age to withdraw any amount in excess of $3m?
Making an individual liable for the investment success of the their SMSF is a huge deterrent to actually spending the time seeking out high growth investments that will potentially create retirement independence from the government. If the individual is going to be liable then they should at the very least be given the option to opt out of the compulsory contribution system.
It seems the government is intent on having every single Australian reliant on the government for their existence, and have given up on the dream of Australian’s aspiring to be self sufficient and not being a burden on the rest of society.
Back in the 80’s and 90’s super contribution was the preferred options to obtain the ability to fund retirement, those that could DID – now 30 & 40 years later we are being taxed for following the government advice. We didn’t have 5-7% housing loans either and we invested, all in the name of self supporting our old age. This is bad policy along with migration – how can we support 700k-800k migrates that entered Australian in the last 3 years – tax the generation that is now supporting itself. Crazy and stupid decision, it’ll backfire !! People will withdraw super, spend it and apply for the pension. Do these law making’s, have no brain at ALL.!
If Wayne Swan and Chalmers and Treasury and the Labor party are so concerned about the tens of millions in people’s superannuation fund, why start this tax at $3m or even $2m for the Greens?
I reached $1m not many years ago after saving for over 30 years. It then grew quickly from there to over $3m predominantly from capital gains, which I know that I will pay CGT on and fair enough (I guess). I say “I guess” because when I sell, to buy an equivalently priced property, I will be behind by likely millions of dollars after paying cgt on the gain, commission and legals on sale and commissions and legals plus stamp duty getting back in again. That’s why people hold on – too many disincentives to sell.
If the $3m or $2m is an issue, just let people take their money out regardless of age.
Or, make the industry super funds spend the money they need to update their software to calculate taxable income, then charge 30% tax if you must on taxable income only.
However, contrary to what these people will have you believe, many people with over $3m may not be on the highest tax brackets, so they will be punished as they will not get a concession.
Otherwise, they are already in the cohort of people that pay far more tax revenue for the govt that any other group. I read it’s 550% more tax in some cases.
Fair? Not in my book. Egregious? Most certainly.
Also, they will not get the equivalent of the $1m dollar annuity pension for life into their nineties. They do not get govt handouts. They are not positively-taxed (for want of a better term) for all of the government handouts that are available to most.
Like many that may be affected, I am retiring shortly, having sold my business and winding down.
I have a plan moving forward and it involves paying Nil 30% tax on paper profits. I will add that this tax taxes the gain before sale ( paper profit) and taxes again post sale. That’s double taxation in my book.
These people are deaf on the subject and will not even consider good reason from anyone.
Just plain arrogance.
I refuse to pay 52% equivalent on the taxable income of the fund. That’s way over the highest personal rates and a punishment on top of losing the super concession.
If the Greens get their way, one year for me would have been 72% tax equivalent on the taxable income. Really, they are perhaps not giving us a choice and this is what their goal is anyhow.
Thank you for this article and for all of your time on this.