The Senate should reject the government’s Division 296 tax bill, which heavily impacts small businesses and investors and may force them to borrow to pay the tax, an accounting body has claimed in the lead-up to the debate on the proposed legislation.
Chartered Accountants Australia and New Zealand (CAANZ) chief executive Ainslie van Onselen said the introduction of the bill would not protect farmers, individual investors and small business owners who may be forced to borrow, or sell assets, to pay any taxes levied on unrealised capital gains inside their superannuation.
“Imagine a farmer whose self-managed super fund owns their $2 million farm. The farmer has not made any super contributions or withdrawn any money from the fund during the year. The value of the farm doubles over a year to $4 million even though trading conditions have been tough. The tax owed on this is $37,500,” van Onselen said.
“How can the government expect anyone to have an extra $37,500 sitting in the bank for an unexpected tax bill when the nation is in the grips of a cost-of-living crisis and persistent inflation?”
She stated the bill, which is scheduled for further debate in the Senate on 6 February, should address the issue of taxing unrealised capital gains, but added its operation was not settled and the potential revenue from it will be reduced by the costs to administer it.
“If the government intends to tax unrealised gains, then for consistency it should also provide a tax refund for unrealised losses,” she said.
“There remains uncertainty and complexity as to how this policy will impact defined benefit schemes, prevalent among public sector workers, and the constitutionality of this policy as it relates to judicial pensions.
“CAANZ believes this tax will be very expensive for individuals, superannuation funds, tax agents, financial advisers and the ATO to administer, and will raise little, if any, net revenue when all these costs are considered.”
The head of an SMSF administrator has also criticised the design of the tax, noting the government has brushed away opposition as being vested interests.
Heffron managing director Meg Heffron said in a blog post today: “It’s an interesting insight into the quality of our debate these days that it seems anyone arguing against Division 296 is presented as ‘digging in for long lunches and bosses’ in contrast to the good guys, that is, pro Division 296, who are for ‘cost-of-living help and strengthening Medicare’.”
Heffron said those statements came from Treasurer Jim Chalmers in his defence of the proposed tax and there were better methods to reduce super tax concessions for those with high balances.
“Let’s be truly honest about why we’ve ended up here. Collecting any tax in an equitable way involves some complexity,” she said.
“The government is unwilling to take on the challenge of complexity in order to be fair, preferring instead to hope that no one will notice the really bad design of Division 296 because it’s easy to hate rich people.”