Minister Jones was responding to amendments put forward on Wednesday by independent member for Wentworth, Allegra Spender, to the proposal to tax unrealised capital gains.
Spender’s amendment called for the exclusion of taxing unrealised gains in the design of the policy, as well as a scheme that allows entities to defer their assessed Division 296 tax for an income year if the conditions provided for in the scheme are met.
Additionally, Spender called for the minister to “cause an independent review of Schedule 1 to be conducted as soon as practicable after this act receives the royal assent”.
“The review must include a review of the impact, or potential impact, of Schedule 1 on the start-up and high-growth sector,” the amendment stated.
“ The persons who conduct the review must:
(a) consult with the public in conducting the review; and
(b) give the minister a written report of the review in sufficient time to enable the Minister to comply with subsection (4).
(4) The minister must cause a copy of the report of the review to be tabled in each House of the Parliament before 1 July 2025”.
Minister Jones said there were a range of unrealised capital gains taxed in Australia.
“Whether it’s land tax, the taxation arrangement on APRA-regulated funds, stock-in-trade arrangements on businesses – there’s a whole range of taxes that currently apply, in Australia and elsewhere around the world, to unrealised capital gains,” he said.
Shadow assistant treasurer Luke Howarth said the proposal to tax unrealised gains will hit retirees, superannuants, farmers, and small and family business owners the hardest.
“They may have to sell assets all because there has been a capital gain. I could go to anyone in Australia, people in the gallery or anyone else, regardless of what they earn, and ask, ‘Do you think that there should be a tax on unrealised capital gains?’” he said.
“I could say to people in the gallery: ‘You bought a house for $500,000. It’s now worth $800,000. You haven’t sold it yet, but the government wants tax on $300,000 because that’s your capital gain.’ That is what this Albanese government is doing to Australians right now with this bill, and we in the coalition oppose it. I’d ask people who are listening around the place, is that a major change to super? I think it is.”
Impact on venture capital
Spender said one of her concerns with the taxing of unrealised gains was the impact it would have on venture capital in Australia and start-up companies that rely on investment, particularly from the SMSF sector.
“I’m concerned about how this plays out in practice, and I’m going to focus particularly on the venture and technology sector,” she said.
“Australia has lower investment in venture than other countries. We have about a third of the rate of investment in young, growing firms – venture capital – than the US, and about half that of the UK. We have a productivity hole. We know we need to grow it, and we know that young, growing firms drive productivity in this country.”
She added that according to the Tech Council, around 25 per cent of money that goes into venture comes out of SMSFs.
“Venture is volatile, and it is illiquid. Therefore, if we are going to be taxing unrealised gains on venture firms, which are both volatile and illiquid, there is a real danger that people in self-managed super funds are just going to move that money out of venture and into other areas – maybe the listed index,” she said.
“They are going to miss out from a returns point of view, and we as a country will also miss out, from the point of view of not having that investment in venture firms that is critical to future growth and productivity.”
Minister Jones said he also looked at the issue concerning venture capital and start-ups.
“I was concerned that this would be an issue at scale. On the data available to me, it’s not. Less than 3 per cent of the total assets, and that is the very top end of funds, would be invested in these classes of assets – that is, if you were to include all debt securities, all unlisted shares and all loans in that class of assets,” he said.
“That’s not true either. So, at the very top end, it’s 3 per cent of those types of assets. I don’t think it is going to have the impact that the member [for Wentworth] is concerned it will, but I am confident and would commit that a review conducted of these arrangements would look at and deal with that issue.”
Minister Jones said he believes liquidity issues within funds are largely due to “lumpy assets” such as real estate.
“The examples that are generally brought forward are commercial real estate inside a self-managed super fund or a farm. The simple fact of the matter is that these assets are earning money,” he said.
“If it’s a commercial property, it’s earning rent. If it’s a tenanted property in the residential real estate market, it’s earning rent. If it’s a farm, it’s earning income. That income is available to cover any liability that may be incurred as a result of these new arrangements. Other, non-fund income is also available to meet the liability.”
He continued that a feature of the arrangements in the bill is that a capital loss can be brought forward.
“A loss made in one year can be offset against a gain made in a subsequent year. I repeat: it’s a modest change. I don’t seek to discount the genuinely felt and well-advocated positions that have been put by members of this House. We’ve thought through them all,” Minister Jones said.
He said that a review of the bill would not commence in its first year but there would be a post-implementation review to be completed before 1 July 2027.
“That’s a time after which you’ll have had two cycles – two taxation years will have passed – and you will be able to look at the issues of concern.”
Jones is on his way out and not a moment too soon.
Lying yet again to protect their union funding as the union funds can’t track member income. Labor get paid by unions, the unions get sponsorship income from the union funds that get the money out of the industry fund members pockets. The poor muppets that they are.
Show some moral integrity. You are signing off only proving what a union sycophant you are and you have no place representing the interests of the Australian people.
Yes, agreed aengus.oleary. The “modest change” will cost our SMSF more than triple what we currently pay, and in some years will equate to over 52% tax on the normal ‘taxable’ income (that’s higher than any personal tax rates too). Just because the larger funds that will be largely unaffected don’t have the software to calculate taxable income on superannuation holdings per member? Seriously? And this guy is the assistant treasurer. Labor have shown that they just do not care, and will do anything including LIE to get into power and then stay in power.
So many issues with this tax – non-refundable in a loss year and potentially held by the ATO forever, etc etc. I won’t bore you with the long list of issues. Labor have turned a blind eye to them and they are too complex for most to understand, hence why this egregious tax may just make it through the Senate.
Jones earns so much more than most, including me, and now wants to just take my life’s savings when I am on the cusp of finally being able to access it. They already will be getting a hefty amount in CGT when the assets are sold, but no, that’s not enough. They want that plus more than triple the current 15% tax that I pay.
The 15% tax on superannuation earnings was in incentive to lock up the savings for decades to encourage a self-sufficient retirement. I still can’t access it, so yes, it’s not only low-hanging fruit, but most of us are also sitting ducks. Our retirements hang in the hands of just a few Senators now…. I pray to God that they understand what they are doing.
‘a loss made in one year can be offset against a gain made in a subsequent year; I repeat ‘it’s a modest change’. (Mr. Jones)
Changing from a pre-election promise to not meddle with super, to the attempted introduction of this unprecedented taxation of unearned gains in super, is a major change. (You can quote me on that.)
Seeing Labor receive retribution for the obvious pre-election falsehoods perpetrated (they seem to have learned the wrong lesson when they lost the prior ‘un-losable’ election by hinting too strongly to the public re their intentions) -would be a welcome change.
Call the election please, so we can move on with clarity.
In response to ghollands – The trouble is his “dumb comments”, will potentially be taken as true by others such as key senators who do not understand economics and accounting etc (so hard to be an expert at everything). Its the reason why people do not trust politicians in general – they make sweeping statements to support their agenda aimed to deliberately deceive. A perfect example is when they say “that is not our current policy”, meaning in fact “it is not our current policy but we are delving into it as a potential future policy that we would like to see enacted”.
Minister Jones continues to be delusional and incompetent! The examples he gives are simply not relevant to the principle that is about to be passed into law! There are only a couple of alternatives – he, or his advisers do not know the law – (most likely) or it is just political spin. Best ignored as dumb comments.
By the time an independent review even starts, the damage to superannuants will be irreversible as forced sales will already have taken place – either by necessity or as superfunds are rolled backwards. Unfortunately, there will be no going back for many of those affected.
And in the history of our fund, we have not has a negative year, so there will be no loss to carry forward. We have been blessed with positive gains due mostly to capital gains, but with an average tax bill over the last 6 years based on the formula put forward, our average tax bill is almost TRIPLE the current tax that we pay in superannuation.
Essentially, by looking after our funds that have not been raided by unions etc for their own use, we have had great growth, and this is what this Labor government does not want to see. We were going to have to pay CGT when we eventually had to sell, but they can’t wait to get their grubby hands on our funds so they created this egregious formula, which I feel is very unethical in so many ways. But hey, that’s current Labor for you. They lied to get into power and this policy would not have been announced were they not victorious after that election campaign of lies.
Of course businesses don’t pay tax on unrealised gains on trading stock as generally valued at cost at year end (unless the business CHOOSES otherwise). Another lie by this deceitful government
Politicians LIE !
This is NOT trading Stock.
Minister Jones is telling a BARE-FACED LIE !!
Minister Jones and his department have responded to my own letters to them in a way that signifies that they really do not care or understand how this will impact those that will be affected.
Minister Jones is stated as saying: “That income is available to cover any liability that may be incurred as a result of these new arrangements. Other, non-fund income is also available to meet the liability.”
I am about to retire, so I need the income generated from my superfund assets and will quickly have to sell those income-producing assets to pay for a retirement as well as tax for a total tax bill well in excess of TRIPLE the 15% that I currently pay. In some years based on calculations of the last 6 years, I will be paying in excess of 52% tax of the taxable income of the fund.
And he refers to non-fund income to pay this liability? Yes, he doesn’t understand as I have said – I have no assets outside of my home to pay this tax. The non-fund income that he can only be referring to, is dependent on me selling my home.
This is a socialist/communist government. They simply do not care about the people that pay the bulk of all personal tax revenue in Australia.
I did not work and sacrifice my entire life (thanks to the inspiration of the Keating-era Labor government) to then be forced to sell my home or my income generating assets so soon after retirement.
I already pay well in excess of what I consider “fair” tax and I want to finally be able to enjoy the fruits of my labour, which I left to my retirement days, unlike others that have lived for the day. My bad it seems! I was mislead, though I understand that Keating is also against the taxing of the taxing of the unrealised gains aspect of this egregious tax.
The government should then refund taxed on unrealised losses as well. They don’t. Only want it one way. Its a wrong concept, please abolish.
Be very careful Anthony and Stephen, if you force this legislation through you will lose the next election, just like the “drovers dog” did by trying to steal “franking credits”.