Govt’s $3m super legislation faces Senate blockade
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.