Accounting, Compliance, Legislation, Tax

Tax on unrealised gains not new

Treasury unrealised capital gains $3 million superannuation earnings tax

Treasury has stipulated the taxing of unrealised capital gains is not unique to the proposed earnings tax on individual superannuation balances over $3 million.

Treasury has defended its approach to calculating revenue for the purposes of the proposed 15 per cent tax on total super balances above $3 million, in particular the inclusion of unrealised capital gains in the methodology.

“We do tax unrealised earnings in other places of the Australian tax system. For example, there are different valuation methods for trading stock,” Treasury retirement income policy division first assistant secretary Lyn Kelly told attendees at The Tax Institute National Superannuation Conference last week in Melbourne.

“[It happens] in the CGT (capital gains tax) rules [as well]. If someone leaves Australia and [the assets they own] don’t have any attachment to Australia, we deem them to have disposed of those assets and tax them on unrealised gains.”

Kelly reiterated the measure has taken its current form so it can be applied consistently to all superannuants.

“We tried very much to design this policy in a way that can be applied across the industry because I don’t think about it in terms of SMSFs and large super funds. I think about it as Australians as [super fund] members and the reality is members have their superannuation interests in a whole range of funds,” she noted.

“There is no hard line between the two. There are a whole bunch of people who have an interest in an SMSF and an APRA (Australian Prudential Regulation Authority) fund and they do that for a lot of very valid reasons.”

According to Kelly, minimising the compliance burden for the retirement savings industry was also a key consideration in the formulation of the proposed policy.

“I’m very, very mindful about the compliance burden and it’s about leveraging existing definitions in the system and leveraging existing reporting in the system because I think none of us want [an increased] compliance burden,” she noted.

“So the way the law has been designed is with that in mind because if we have a large compliance burden with only 0.5 per cent of the population of members being impacted, the cost will fall on everyone else.

“So it’s about designing something that is targeted, proportional and fair.”

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