Retirees are disappointed over the federal government’s unwillingness to consider making any changes to the bill that will introduce the proposed Division 296 tax, according to Australian Independent Retirees.
In particular, this cohort is most concerned over how unrealised capital gains will be used as the basis for calculating the impost on total super balances over $3 million.
“Unrealised capital gains are not actual earnings received and should not be used in calculating this new tax. Earnings should only be calculated on actual earnings received, such as interest, dividends, actual net realised capital gains, investment distributions and dividend franking credits,” Australian Independent Retirees chief advocate Wayne Strandquist noted.
“This new tax on unrealised gains will impose significant hardship on those with investments in non-liquid assets as they try to find the cash. It is likely that many retirees will need to sell long-term assets in unexpected timeframes to meet their tax obligations to the ATO.”
Further, Strandquist acknowledged the lack of an indexation mechanism for the $3 million threshold for the tax is also causing angst among the body’s membership.
“Retirees understand that it may be reasonable to have a cap on a fund member’s total superannuation balance attracting concessional tax treatment, but the cap should be indexed like other superannuation caps. Indexation is essential where thresholds are applied in order to maintain the threshold at current money values,” he said.
“By way of example, the cumulative inflation rate in Australia over the last 10 years has been about 37 per cent.”
He pointed out if no indexation mechanism is applied to the $3 million threshold, the real purchasing power of superannuation savings will be significantly diminished over time.
In addition, he expressed worry over the situation whereby the government only requires support from the Greens in the Senate to have the Division 296 tax bill passed.
“We are concerned that the government will agree to as yet unknown policy demands that could further impact our independence in retirement,” he stated.
