Wilson Asset Management chairman Geoff Wilson has spent seemingly every moment since Labor won the federal election in May shouting out the faults in Division 296.
Now, in a submission to the Economic Reform Roundtable, Wilson Asset Management has delivered its own alternative to the additional 15 per cent tax on all earnings attributable to balances above $3 million.
Called the Progressive Super Surcharge and Tax Offset, WAM’s alternative also kicks in for balances above $3 million, however it would only apply to realised gains and raise $2.433 billion in revenue.
“Despite requiring Senate approval, the proposed tax on unrealised gains has already prompted a rush to liquidate assets ahead of the 30 June 2026 implementation date,” the submission said.
“Australia is proving to be no different than Norway, Spain and Sweden, where taxing unrealised gains led to capital exodus and therefore lower than expected tax revenue.
“The Progressive Super Surcharge will tax superannuation more equitably, while the Tax Offset will cover the administrative and technology costs involved in implementing systems capable of accurately calculating and reporting realised gains.”
Essentially, the plan would apply a tax on realised gains applicable to the portion of any superannuation balance above $3 million, increasing alongside the size of the total super balance.
“The outcome of the proposal would allow the government to increase tax revenue from high balance accounts without breaching the realisation principle of the tax act,” WAM said.
The proposed additional taxes for the Progressive Super Surcharge are:
- Balances of $3 million – $6 million: an additional 15 per cent tax on realised gains.
- Balances of $6 million – $10 million: an additional 17.5 per cent tax on realised gains.
- Balances of $10 million – $20 million: an additional 20 per cent tax on realised gains.
- Balances more than $20 million: an additional 25 per cent tax on realised gains.
“Our proposal includes a complementary Tax Offset, to compensate for the administration and system upgrade costs required by Australian Prudential Regulation Authority (APRA) regulated superannuation funds claimed at the individual level.
“Importantly, under the Progressive Super Surcharge and Tax Offset, no change is proposed for the first $3 million of any Australian’s superannuation account. The tax would only be triggered upon the sale of an asset for a profit, with interest and dividend income being included.
“The Progressive Super Surcharge and Tax Offset maintains the social contract with all Australians. It guarantees the provision of trillions of dollars of patient long-term capital to support start-ups and small- to mid-size enterprises which are vital for increasing productivity. It will also make our society more equitable, with the tax burden to be borne by those with larger superannuation balances.”
The tax offset, WAM explained, would cover the cost of the one-off system upgrade and ongoing costs required to calculate realised gains, with the calculation built on the costs assumed within the Div 296 bill’s explanatory memorandum.
“The ongoing administration of the Tax Offset is provided to superannuants when completing their annual tax return. This ensures that the super system, not everyday taxpayers, funds the compliance build and ongoing costs,” the submission said.
WAM added: “This proposal will modernise the superannuation system and raise more revenue than is projected under the proposed Division 296. Yet, unlike Division 296, it will not discourage investment, as our prior research found a $94.5 billion deadweight loss could be created if the taxation of unrealised gains proceeds.”
