The teal independent MPs have called for amendments to the bill that will introduce the Division 296 tax, citing concerns about its potential impact on SMSFs, small businesses and farmers as key reasons for opposing the legislation in its current form.
In a joint statement released today, the eight teal MPs identified the taxation of unrealised capital gains as the bill’s most problematic issue, describing it as an unprecedented measure in Australian tax law that creates “uncertainty” for many Australians, including those with SMSFs.
“The government’s planned changes to superannuation laws that would see unrealised gains taxed could turn retirement into a nightmare for as many as 50,000 Australians who are self-managing their super,” Member for Goldstein Zoe Daniel stated.
“Self-managed super fund members who hold illiquid assets such as property will be required to pay tax before realising those gains and many may not have the funds to pay the tax.
“It is a looming nightmare for people such as farmers who are asset rich, but cash poor, a nightmare that can be avoided by amending this legislation.”
Member for Indi Helen Haines echoed these concerns and suggested the bill may even force some farmers to sell their land.
“I am concerned about the unintended consequences for a very specific group of people who hold their family farms in self-managed super funds,” Haines said.
“If this tax on superannuation above $3 million goes ahead as currently drafted, these farming families may not receive the lease payments or rental yields to meet the annual tax bill on their land assets without selling the land itself.”
Member for North Sydney Kylea Tink, who introduced an amendment to remove unrealised capital gains from the earnings calculation for the tax, stressed the long-term consequences of the bill’s lack of an indexation measure.
“The lack of indexation on the large balance threshold amount means, over time, this measure will impact many more ordinary Australians, who have done nothing more than they are required to do under law in terms of meeting their superannuation payments,” Tink said.
“Leaving this legislation in limbo creates even more uncertainty. The Better Targeted Super legislation was introduced months ago—what is the Minister [for Financial Services Stephen Jones] doing?”
Member for Wentworth Allegra Spender, who plans to introduce an additional amendment allowing taxpayers to defer paying a liability under the tax to ease liquidity risks, criticised the policy as being misdirected.
“We need to have appropriate tax on super, but taxing unrealised gains is just bad policy. People shouldn’t be taxed on paper profits they may never see,” Spender said.
“It appears this is a policy fudge to accommodate technical limitations in large Australian Prudential Regulation Authority-regulated funds, when the overwhelming majority of these high balances are in self-managed super funds that could easily calculate their actual earnings and associated tax.”
Following a recent trip to Canberra to voice its concerns about the legislation, the SMSF Association noted crossbench support for the bill was far from guaranteed, leaving its progress through parliament uncertain.
