The federal government is seeking to impose a tax of 15 per cent on people with a total super balance above $3 million from 1 July 2025, including the taxing of unrealised capital gains.
We have been campaigning against the changes since they were announced almost two years ago in the belief most Australians don’t realise the true implications of the proposal.
The changes will undermine the overall stability and structure of what is one of the best superannuation systems in the world and force more people to rely on the age pension in retirement, resulting in increased aged-care spending and completely blowing out future budgets.
The government’s continued claim the proposal will only impact around 80,000 of Australia’s wealthiest is wrong and insulting.
The younger generation are essentially being told they have no chance of ever having $3 million in their superannuation by the time they retire, so they don’t need to worry about the changes – it’s counterproductive and belittling.
Federal Treasurer Jim Chalmers is essentially saying to our youth: “Do not dream big or aim higher because if you succeed, I am going to punish you.” They’re being robbed of any real opportunity to save and be self-sufficient in their retirement. It’s essentially stealing money from the younger generation.
Further, with future inflation, regional disparity and the continued rise in the cost of living, by the time today’s 20 year olds are retiring, $3 million is likely to be considered modest or potentially even insufficient.
Common sense would dictate we encourage today’s children to save for a rainy day so they can continue to live a comfortable lifestyle in their later years, but instead they’re going to wear the burden of their money being used to fund the age pension as more people will be relying on government support in retirement instead.
Let’s not forget, we’re living longer, which means people need to fund their retirement and age-related costs for longer to maintain a decent quality of life with a comfortable standard of living.
Aside from the younger generation, there are other groups that stand to be significantly disadvantaged by the changes as well, including:
- Farmers: The National Farmers’ Federation has expressed serious concerns about the impact of the changes on farmers, warning families will be forced to sell farm assets and property to meet unrealised capital gain liabilities. These are legitimate concerns and farmers are likely to be punished for factors outside their control while politicians conveniently shift the financial planning goalposts.
- Start-ups: Many start-ups rely on investors and venture capital for funding, some of which may come from superannuation funds. However, if investors are to be taxed on unrealised gains, it creates a disincentive and these entities may find it more difficult to source funding in the future. What kind of message does that send? That Australia is not a place for innovators and entrepreneurs because the government will punish you for your successes with measures such as these.
- All taxpayers: The measures fundamentally change the superannuation system and create a disincentive to save, which will force more people to rely on the age pension in years to come. That’s a significant cost burden for taxpayers to have to fund.
The final increase in the superannuation guarantee comes into effect from 1 July, rising from 11.5 per cent to 12 per cent. Super will now also be included as part of paid parental leave payments.
While I support those measures, they’ll only serve to disadvantage people should these new proposed changes be passed.
On the one hand we have changes coming into effect that boost superannuation balances and yet at the same time the government is trying to pass legislation that will punish you for boosting your balance too much.
It’s hypocritical, wrong and makes absolutely no sense.
Naz Randeria is managing director of Reliance Auditing Services.