SMSF Association Media Release
The SMSF Association is urging the Senate crossbench to reject legislation tabled in the Parliament today that proposes a tax on the earnings of superannuation balances exceeding $3 million.
Association CEO Peter Burgess says that taxing unrealised gains, the key feature of this proposed new tax, will have “unintended consequences and erratic outcomes.”
“Taxing unrealised capital gains is a tax on market movements and changes in asset values, not income – an alarming precedent as it represents a fundamental change in how tax policy is implemented in Australia.
“As the legislation is currently drafted, a person with a high superannuation balance, whose interest has received taxable income in a year, will not be subject to this tax if their Total Superannuation Balance (TSB) movement does not trigger this tax.
“Conversely, a person who has a one-off spike in asset values, putting them over the threshold, will be subject to this tax, with no tax refund or adjustment available where the value causes them to be below the threshold the following year.”
Burgess says linking this tax to movements in capital markets will give rise to big swings in a member’s tax liability from one year to the next making liquidity management extremely difficult.
“We remain deeply concerned that the $3 million cap will not be indexed, meaning the tax net will grow exponentially in the coming years.
“We’re also disappointed many of the technical anomalies we raised during the consultation phase have not been addressed in the legislation before Parliament.
“For example, while the decision to exclude people who pass away during a financial year is welcomed, an outcome of the drafting, which has not been corrected in the legislation before Parliament, is that a person who dies on 30 June of a financial year will not be excluded from this tax.
“From the Association’s perspective, these are fatal flaws in the legislation, highlighting the need for
a more careful and considered approach on this policy issue.”
He adds that the primary reason given for the legislation – large superannuation balances – has been addressed. “There are levers, via existing caps and measures, in place now that will limit the growth of disproportionately large balances in the future and address existing large balances over time.
“The tax now being proposed will simply add further complexity and red tape to a superannuation system overburdened already with regulation.”
The Association’s National Conference, being held in Brisbane from 21-23 February, will have several sessions and workshops unpacking the details of this proposed law and addressing industry concerns.