ANALYSIS
Few people in the financial services sector believe that the taxation of unrealised capital gains via the Government’s $3 million superannuation tax concession cap legislation is a good idea but the 3 may election result removed their political leverage.
Notwithstanding the dramatic headlines of self-managed superannuation fund (SMSF) trustees rushing to sell assets to avoid the implications of the tax, and the warnings of a dearth of venture capital, the lobbying objective should now be to minimise the damage at the margins.
And sitting on those margins is the possibility of indexation – something which has already gained some positive acknowledgment from the Senate cross-bench.
The bottom line is that with the Australian Labor Party (ALP) having handsomely won the election, the Treasurer, Jim Chalmers is not for turning on the legislation which started life as the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 and which has already passed the House of Representatives.
The timing of the election and the failure of the Government to navigate the legislation through the Senate before the Parliament was prorogued means that it will have to restart the legislative process but, if anything, it will be starting from a stronger position than before.
Notwithstanding the restart and hits strengthened position, there exists room for marginal change which is what should now be sought.
All of the arguments currently being ventilated about the legislation were rammed home to the Government by the major industry stakeholders via a Treasury consultation in October, 2023, which received 70 submissions and resulted in some minor refinement particularly with respect to Federal judges.
The SMSF Association which has been front and centre in its unbroken opposition to the legislation used its submission to the Treasury consultation to specifically raise the taxation of unrealised capital gains, noting that, as a result, it “utterly reframes the policy position, from one that targets ultra-high net wealth individuals, to one that starts to capture elements of middle Australia, small business owners and farmers. It has very different policy intentions and outcomes”.
“The lack of indexation of the threshold will over time, because of inflation and increasing wages (and therefore increased compulsory superannuation guarantee payments), see this measure impact many more ordinary Australians,” the association said nearly three years’ ago.
Last week, SMSF Association chief executive, Peter Burgess was referencing the need for the Government to “address catastrophic flaws in its proposed super tax” noting that a “critical flaw in the proposed tax is its calculation of investment earnings, which inexplicably includes unrealised capital gains – penalising SMSF members for paper profits that may never materialise”.
The reality in the new Senate is that the Government and the Greens can combine to carry the legislation, thus diplomacy may be the best avenue for extracting marginal change.