The SMSF Association had refuted claims made by Treasurer Jim Chalmers this morning in an effort the continue attempts to pass the bill dealing with the proposed Division 296 Tax.
Earlier, during a Sky News TV interview, the Treasurer confirmed he would be pursuing the measure and defended the intension to tax on unrealised capital gains as part of it saying “First of all, we did heaps of consultation and this was the best way to go about it.”
“Secondly, there are other parts of the superannuation system where unrealised gains are calculated and thirdly, when it comes to some of the issues raised by farmers and others, it’s already the law that people are supposed to maintain an element of liquidity to be able to meet their tax obligations and so we know that people have got a view about it,” he added.
SMSF Association Peter Burgess contested each of Chalmers’ claims individually beginning with the assertion there had been “heaps of consultation” in formulating the policy.
“What the Treasurer described as ‘consultation’ was not genuine engagement but a procedural formality,” Burgess explained.
“It started with a fixed proposal to tax unrealised gains and not index the cap, and there was no deviation from these positions despite compelling evidence of its potential deleterious impact on the wider economy,” he added.
“The absence of significant adjustments or receptivity to alternative views indicates that the consultation was merely a process to endorse a pre-decided policy position instead of a genuine effort to consider other views.”
He also questioned the validity of Chalmers’ view that the unrealised gains are used for calculations in other parts of the retirement savings system.
““In some parts of the superannuation system deemed income rates are applied which differ fundamentally from taxing unrealised capital gains,” he said.
“By drawing a parallel between these distinct approaches, the statement confuses the public about prevailing financial practices within the system and how capital gains are conventionally treated and taxed, thus undermining trust in the system’s fairness and transparency.”
Further, according to Burgess, the Treasurer’s reference to the existing liquidity requirements for SMSFs as misleading in the context of satisfying the liabilities the Division 296 tax will introduce, particularly on the farming community.
“While it is standard for laws to require liquidity to meet existing tax liabilities, the new policy introduces a liquidity demand far beyond what anyone could anticipate or plan for,” he noted.
“By imposing taxes on unrealised gains, the policy compels asset holders to ensure liquidity levels that might necessitate the premature sale of assets – a requirement out of step with traditional practices where taxes are only imposed upon the realisation of a capital gain.
“The abrupt and severe nature of these demands can disrupt financial planning across various sectors, placing undue strain on individuals and businesses unprepared for such drastic measures,” he concluded.
