Peter Burgess, SMSF Association CEO, said the industry had put forward “many alternatives” that would achieve the desired policy outcomes without all the complexity, cost, unintended consequences, and disruption to the flow of investment funds so critical to many sections of the economy.
“At no time has Treasury shown any genuine desire to consult or consider alternatives,” he said.
Tony Greco, senior tax adviser with the Institute of Public Accountants, said the IPA learnt very early in the consultation process that the method proposed was supported by APRA funds as being the best option administratively to implement.
“I do not believe due consideration was given to alternative models as Treasury was fixated on pushing ahead with its proposed methodology,” he said.
“It’s ironic that the new tax will impact the SMSF sector more than the APRA funds. SMSFs can perform calculations on a member balance, so alternative methodologies to reduce the concessionary benefits for members with high balances are viable.”
Greco continued that the proposed methodology does not accord with good principles of taxation.
“The Senate inquiry did not engage in alternatives and was comfortable with the methodology on the basis that it impacted only a small portion of the population (so why should we care) and less so on whether it adhered to good taxation principles,” he said.
“Voluntary compliance to tax laws is generally maintained when taxes are levied fairly, and in the case of this proposal, we are already seeing behavioural changes due to the perceived unfairness as taxpayers come to terms with implications of this measure coming to fruition on 1 July 2025.”
Tony Negline, CA ANZ superannuation and financial services leader, said the organisation does not support the Better Targeted Superannuation Tax Concession policy and has been highlighting the bill’s design flaws since it was announced in 2023.
“We are particularly concerned about the taxing of unrealised capital gains and the precedent this would set. As a result, CA ANZ has participated in every consultation opportunity available, which includes making submissions to Treasury and the Senate economics committee,” Negline said.
“In those submissions, we explained the design flaws of the bill, the cash flow concerns the amendments would likely create and suggested alternative solutions. If the government is concerned that superannuation is no longer being used as intended, there are other options available, some of which we have suggested in our previous submissions.”
Negline said these include imposing an additional tax on super fund withdrawals for those with a total super balance of more than $3 million, so the tax is being paid at the time of exiting the super fund, or forcing those with a total super balance above a specific threshold to remove the excess amounts from superannuation.
“The Parliament now has an opportunity to amend this legislation so the taxing of unrealised capital gains precedent is not set. However, if the bill is passed, we will work with the government to ensure the policy is implemented as best as possible, now and in the future,” he said.
Natasha Panagis, head of technical for the Institute of Financial Professionals Australia, said the IFPA has been actively involved in the consultation process since the government’s proposal was first announced.
“We made multiple submissions, participated in Treasury roundtables, and appeared before the Senate economics legislation committee alongside other industry bodies to raise serious concerns about the Division 296 tax and to argue that the bill, in its current form, should not be passed without significant amendments to ensure fairness and equity for all Australians,” Panagis said.
“We put forward a number of alternative approaches for Treasury and the government to consider. Unfortunately, these have largely been ignored. From the outset, we have maintained that if changes to tax settings for larger superannuation balances are deemed necessary, there are simpler, fairer options – most notably, taxing actual earnings above $3 million rather than taxing unrealised gains. This approach aligns with existing tax principles and avoids punishing Australians for paper gains that may never materialise.”
Panagis added that the IFPA also advocated that, should the existing Division 296 framework be retained, several critical changes are needed – beginning with a comprehensive review of the superannuation system as a whole.
“Continued piecemeal changes only add complexity and undermine confidence in the system,” she said.
“Disappointingly, the consultation process felt more like a procedural formality than genuine engagement. The terms of reference specifically excluded comment on key elements such as the $3 million cap, lack of indexation, and the methodology for calculating the tax. Despite this, many industry representatives – including IFPA – raised these issues anyway, only to be told, unofficially, that they were off the table.”
She said the Treasury claims to have consulted extensively with industry, but conducting meetings does not equal meaningful consultation – especially when the lived experience of industry experts is dismissed.
“Treasury’s goal of achieving ‘sector neutrality’ is also fundamentally flawed: the three sectors of the super system operate under different valuation methodologies, making harmonisation impractical. If legislated, Div 296 will introduce significant horizontal inequities across superannuation fund types,” Panagis said.
“For instance, constitutionally protected funds may be exempt altogether, defined benefit fund members will face a complex, deferred tax liability, and others – particularly SMSFs – will be subject to annual tax on unrealised gains.
“This isn’t about whether high-balance members should contribute more tax. It’s about how that tax is implemented. Unrealised gains, a non-indexed cap, inequitable loss measures, and immediate tax liabilities create complexity, cash flow stress, and a real risk of double taxation – particularly for SMSFs holding illiquid assets like property.”
The comments by Treasury beggars belief! ALL super fund are covered by the IDENTICAL accounting treatment for the production go financial statements. YES, 100% of funds are required to report by the same rules – that is the members’ balances would by definition include the market value of their assets. There is no reason on this earth that would make Industry super funds any different ( Except, of course the “dodgy” valuations of SPVs that they have for their cosy development projects that enhance their “alleged” returns to members shown on their advertising materials. Oh and by the way Davo, you can rollover from fund to fund without meeting a condition of release!
Yes, you can rollover from Fund to Fund, however as the tax is based on Total Superannuation Balance, it includes that member’s accounts in all their super funds – so rolling a portion of their $3m balance out of one fund to a different fund isn’t going to make any difference.
TAXING UNREALIZED CAPITAL GAINS AS PER LABOR POLICY.
Peter Brugess is an optimist, and good for him, as he should be in his comments concerning negotiations with the government and the Greens.
However, I doubt the government really does not expect to raise anywhere near the estimated capital gains tax on super from unrealized capital gains !
Why, you ask ?
They know or should know, that people who followed the Law concerning super and contributed and have a balance exceeding $3m are not going to just lay down and get smashed with unrealized capital gains tax. They are just not that stupid.
The know that these people will say, enough is enough, let’s just remove it from the super fund after starting a pension thereby getting the money out tax free, where possibly of course.
However, I believe this is precisely what the Labor Governement wants. Each way they “gotcha”. So, it is back to the old days !!
Get it out of super and more than likely into a descretionary trust with corporate beneficiaries. Then it will be taxable anyway.
However, you will get the CGT 50% discount and negative gearing thereby making the difference in taxation negligible. At least in the accumulation stage. Smart minds will be all over this like a rash on a babies bottom !!
If you are a self funded retiree, you are totally screwed and you are back into the taxation system: returns, accountants, the full catastrophy.
There have been many senerios and modellings of which is better for wealth accumulation: inside super or outside super. These are usually done by “super” administrators or “pro-super” pundits,enev actuaries and the conclusion is that super usually beats outside super in net investment return, but not by a massive amount.
There will no doubt be many more of these modellings by “promoters” of both persusasions. This wil be facinating to watch. and remember:
“I pay whatever tax I am required to pay under the law, not a penny more, not a penny less… if anybody in this country doesn’t minimize their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.”
Kerry Packer
This will now change super to some degree. Governments change Rules,Taxation Laws, to move, incentivise, the public into the area they desire at a particular time. The public respond, but then they respond to well and the government of a different persusion or time reverses those incentives. Just like what is happening right NOW!
Bad luck for the older citizens who followed the Law. You are screwed when you are least able to respond: ” life’s a bitch and then you die”,as the saying goes.
This is a perfect example. However, taxing UNREALIZED capital gains is an entirely new ball game.
This biggest concern is whether taxing unrealized caiptals gains in super is a precuror to it being introduced elsewhere. Not a good omen !
When you have a big spending government, you will inevitably get a BIG taxing government to pay for all the “free” stuff. Obviously Labor does not believe it will dampen “aspirational” business entrepreneurship.
This is somewhat true. There are many 25 to 45 year olds who no longer see much benefit in “busting a gut” to get ahead when you can just get a government job at a very reasonable income( eg. $100,000 to $130,000 age 33 ) and just maximize the perks: WFH; Flex-Leave; OT; maturnity/paternity leave; free childcare etc,etc. I have many in this age bracket with this precise attitude.
Let the others “bust-a-gut” and pay the tax. Let’s just “USE” or “milk” the system tp maximize “my” benefit. Smart strategy !!
If this tax does become Law, the “targets” must conclude, “well it was good as long as it lasted and we accumulated much, now it is back to the old ways”; with a corporate tax rate for small business at 25% plus the 50% CGT exemption plus negative gearing plus the use of Trusts, there are plenty of tools for the switched on Tax Advisors and Accountants.
Deja vu all over again !! ???
I am currently moving 3 million out of super to reduce below threshold and will continue to move out of super until this tax law is revoked. The government and super regulations cannot be trusted. What a shame . Shame on our dumb treasurer. Keating’s Legacy destroyed.y
This from the “government for the aspirational”.
Not the aspirational taxpayer. Just a government that aspires to bring achievers back to the pack rather than one that lifts the pack
Re comment by VW
When an unrealised gain is identified, assessed and taxed, the cost base for future purposes must increase to the new valuation. This done properly will prevent double taxation. However, it is a return to the complexity of the original “indexation of cost base” which was then simplified by the 50% concession. Every asset of every fund will need to keep “cost base records” on a member-by-member basis.
Interesting. But very complex with mixed assets I would think?
Food for thought, thank you Patrick. However, for my situation I am evaluating if I want all of this extra layer of complexity. I have to weigh it against heart muscle and stomach lining. I am personally thinking of getting out of all of this red tape and simplifying out of super to more cost effective and simpler to run, tax entities.
After all, it seems to be what they want, with funds over $3m being punished severely. The big stick is swaying me to move out of super. They seem to be encouraging us that way, and there are a lot of pros for it. I got out of my business for the red tape. I don’t need more in super. It’s too complex and easy to be inadvertently tripped up, and I’d rather have full control of my own assets. That was the whole point of the concessions, to encourage you to lock it away. Without the concessions, plus the extra kick in the gut for those where the overall tax in super is higher than company or even personal rates, why would any sane person keep their funds in super? Pity those not old enough or farmers etc without a choice. My tax situation under div 296 is above company rates and in some years above personal rates. I don’t have the will or the wherewithal for this level of complexity. Happy to leave the super system, mostly.
The only way to mitigate a double tax (and it is imperfect) is for SMSF administrators to implement tax effect accounting. A book entry of the after tax cost for an asset. The requirement for annual revaluation exacerbates the level of unrealised “earnings” in the new tax haul.
Sorry Kym, not allowed!
Where in the legislation does it say that the CGT cost base of an asset increases each year along with valuation, or that Div296 tax paid adds to the CGT cost base?
Also, don’t forget that Div296 is a tax on the MEMBER not on the Fund because it is measured against TSB which could involve multiple Funds. Similar to Div293, the member can ask their Fund to pay on their behalf. Therefore CGT on a realised sale is a completely different taxable event attaching to the Fund.
Clearly double taxation, as the member pays when the value goes up each year and the Fund pays on realisation. No offsets.
What? The member pays anyway either as a proportion or as actual
My point is they are two separate taxing events – one attaching directly to the member and the other attaching to the Fund. Therefore there can be no offsets.
The member pays on the increase in value along the way; the Fund also pays on the same increase in value when the asset is actually sold. Taxed on the same “gains” twice.
“a real risk of double taxation”
This is most certainly an attempt to tax capital gains twice. The capital gains will be taxed as normal when they are realised, but along the way also when they have a paper gain.
Some tax commentators have said that Council Rates and Land Tax are also forms of a tax on capital gains.
This is literally a tax on a tax on a tax. I wonder what else they can think of?
It will probably end up like the tobacco excise – people will change their behaviour (partly what the government must want with this ridiculous proposal and its big stick), and the income from the tax will be far less than they wanted and they scratch their head, do the numbers and wonder wtf happened here?
I don’t get it. Do they want us to bring down our balance or do they want the money?
Possibly, they want no one else to join the ranks of over $3m, and they want the rest of us to stay put to pay the tax.
Who needs enemies when they treat their best tax payers like this?
Well the govt has created a real black market in tobacco that the criminals couldn’t do without govt decisions – well done stupid! It is not a risk of double tax it is an actual fact!
It is ridiculous that neither the Treasurer nor Treasury have considered the simple introduction of progressive tax rates for super funds. All funds must do statements for each individual member of every fund APRA Regulated or SMSF. Assessable income must be detailed in the Statement and can remain Earnings + 50% of Realised Capital Gains.
[1] First $180,000 existing tax rate 15%
[2] From $180,000 to say $270,000 20%
[3] From $270,000 to say $360,000 25%
[4] Above $360,000 30%
Too hard for APRA funds. Their systems are very inflexible. So, like daylight savings, the majority wins regardless!
One aspect I have not seen is that any member with a balance of say 2.8m or 2.9m, and unlisted investments or property, will need to incur the expense of a formal valuation just to verify that the new tax is not applicable
You have to value accurately anyway no matter your balance. And your friendly local real estate agent doesn’t cut it.
If you are getting away with this I wouldn’t want to underwriting your auditors PI.
But he spoke to his mates in the union aligned industry funds and they were happy. We all know it will punish SMSFs more (by design?)…and with no condition of release, younger people are screwed. Suppose they want to keep the money there for the death tax later on…big gains there for a government that can’t stop spending and wastes so much money on the impossible net zero dream and subsequent increased energy costs that are sending the country backwards…all so that other countries can prosper and laugh at us. Insane, what a mob of fools the Australian voters are