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Govt’s $3m super legislation faces Senate blockade

Mike Taylor4 December 2023
Australian Senate Chamber

The Federal Government is far from certain of securing the passage of its legislation imposing a $3 million cap on superannuation balances eligible for full tax concessionality.

The Federal Opposition has signalled it will be backing complaints from the accounting and financial planning professions that the Government’s move carries with it the reality that it will generate a tax on unrealised gains.

Most pundits are expecting the legislation to be subject to key amendments in the Senate, particularly around indexation and the taxation of unrealised unrealised gains.

Senior opposition members and senators have flagged their concerns in statements to the Parliament and during parliamentary committees.

The legislation, introduced on the final day of 2023 sititngs last week, is unlikely to be debated in the Parliament until around April 2024 at the earliest.

Both the SMSF Association and CA ANZ has urged the Senate cross-bench to oppose the legislation and both the Coalition Liberal and National Parties and One Nation have signalled they are likely to heed the call from advisers and accountants.

SMSF Association chief executive said that taxing unrealised gain would have unintended consequences and generate erratic outcomes.

“Taxing unrealised capital gains is a tax on market movements and changes in asset values, not income – an alarming precedent as it represents a fundamental change in how tax policy is implemented in Australia.

“As the legislation is currently drafted, a person with a high superannuation balance, whose interest has received taxable income in a year, will not be subject to this tax if their Total Superannuation Balance (TSB) movement does not trigger this tax.

“Conversely, a person who has a one-off spike in asset values, putting them over the threshold, will be subject to this tax, with no tax refund or adjustment available where the value causes them to be below the threshold the following year.”

Burgess said linking this tax to movements in capital markets will give rise to big swings in a member’s tax liability from one year to the next making liquidity management extremely difficult.

“We remain deeply concerned that the $3 million cap will not be indexed, meaning the tax net will grow exponentially in the coming years,” he said.

For its part, CA ANZ accused the Government of shifting the goalposts in a manner which would give rise to unintended consequences.

“We are urging Parliamentarians to either pause, reject or amend this legislation, CA ANZ Superannuation and Financial Services Leader, Tony Negline said.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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2 months ago

Let’s hope it gets stopped.

I don’t object to the principle of the tax, just the taxation on unrealised gains.

They can afford taxes
2 months ago

These excessively large Supers should never have been tax free and or taxed so minimally.
Don’t Age Pensioners lose income / thus pay tax if Assets Increase, thus pay tax on Unrealised Capital Gains.

2 months ago

An asset test is not a tax, it’s a reduction in the maximum subsidy to pensioners. More reason to dump the income & asset test for all pensioners & move to the NZ system which encourages retirees to stay in the workforce.

Same same
2 months ago
Reply to  Steve

Semantics around a tax or a reduction in Govt benefits due to increased Unrealised Capital Gain are just playing on words, at the end of it all, it’s ALL about the redistribution of wealth via Govt.
Why should the Super Wealthy have had 10 years from 2007 to 2017 paying ZERO tax on very large Supers ?
Why should the Super Wealthy continue to have generous tax concessions at only 15% on very large Supers ?
It may not be the best way to tax it, I can accept that.
Most agree it should be Indexed.
But the policy is pretty sound.

2 months ago
Reply to  Same same

Tax it yes. But it should be on realised gains.

The next step otherwise is tax on unrealised gains for investment properties.

1 day ago

So what is an “excessively large super” and how could it be made?
Take a 20 yo , save $19 a day and at age 65 at 8% it’s just a tad over $3m. This will be very doable with today’s 20yo taking inflation into account since the $3m is not indexed to inflation. I am 73yo I have saved all my life I may hit the threshold and my tax free super will suddenly be taxed. This is not fair to change the rules after the fact.

1 day ago
Reply to  Alex

Alex the big mistake was when Howard made super tax free after 60. This should never have happened.

If you have $3m in super and earn 8%, assuming $1.9m in pension phase you will pay $13,200 tax on $240k of income. That’s 5.5% marginal rate and we haven’t even got past $3m and you have $226,800 after tax!! In FY 2023 you paid 34.5% marginal rate on a paltry $45k gross salary.

Yes super should be taxed concessionally compared to normal income but the old are stealing from the young, they are doing as soon as they aren’t dying as soon as they used to, there are truck loads of boomers and medical costs are sky rocketing.

If you can look to your own kids and grandkids in the eye and say it’s ok if take from you and reduce your quality of life so I can bleat about paying 5.5% in tax on almost a quarter of a million dollars in income annually then i don’t know what to say to you.

The system is too biased towards the old and the young, in their smaller numbers, are being asked to pay.

Btw I am getting towards retirement age and expect to hit $3m before I pull up stumps working. I’m not old enough to start a pension yet but I think my run has been at the expense of the young. Your ride has been easier than mine.

21 hours ago
Reply to  Wildcat

So your answer is to remove yet another concession from the younger generation that was afforded to Baby Boomers. Why do we need to pay more taxes full stop? If you have 3 million in super you are not leeching off the Government in retirement. Super has saved the Government money by paying less in welfare.

21 hours ago
Reply to  Anonymous

$3m won’t be possible for anyone entering the work force now except in truly exceptional circumstances. Only boomers and older ones will have this luxury until $3m is chump change compared to now.

And, of you asked them, I’m pretty sure they say a house, lower income taxes now rather than making me pay extra tax on large sums of money in 30-40 years time and retain massively high income taxes.

Super must have concessions but even $3m is too high. They simply should not have removed compulsory cashing and set the limit at the TBC.