Electoral expediency trumps $3m super tax cap

Mike Taylor

Managing Editor/Publisher, Financial Newswire

3 December 2024

ANALYSIS

In what represents a sign that the Government is keeping its options open on the timing of the 2025 Federal Election it last week effectively shelved its Better Targeted Superannuation Concessions legislation and, with it, the taxation of unrealised capital gains.

Amid the flurry of bills passed by the Senate on the last day of sittings last week, the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill was notably absent from the frenetic horse-trading which took place.

Stripped to its essence of imposing an additional 15% tax on superannuation balances over $3 million, the Government’s legislation may have been easily navigated through the Senate but the allied taxation of unrealised capital gains represents a political/electoral bridge too far for an Albanese Government struggling in the polls.

The reality facing Government tacticians is that in an election year, legislation carrying with the taxation of unrealised capital gains carries with it the same odour as Bill Shorten’s changes to the taxation treatment of franking credits.

And it is worth noting that even Shorten acknowledged that the franking credits issue had significantly hurt his election chances.

What was clear from the report of a Senate Economics Committee review of the Governments legislation published in May was that while the Government might have been able to count on the support of the Greens, it was facing significant resistance from the Federal Opposition and deep scepticism from key elements of the cross-bench.

Irrespective of the current make-up of the Parliament, the taxation of unrealised capital gains is not something an Australian Labor Party (ALP) Government needs on its report card particularly in regional and rural electorates.

Just as Shorten’s proposals around the treatment of franking credits spooked self-funded retirees, the taxation of unrealised capital gains has already spooked primary producers who utilise self-managed superannuation funds (SMSFs).

Thus, even if Parliament resumes sittings next year, it will be a very brave or foolish Prime Minister who seeks to press the passage of a bill which is already causing voter misgivings.