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Govt sop to taxing unrealised capital gains falls flat

Mike Taylor19 April 2024
Finger pushes tax button

Arguments by Labor Government politicians that the taxation of unrealised capital gains can be offset by loss carried forward positions have fallen flat in evidence given to a key Parliamentary Committee.

As well, the Financial Services Council (FSC) has reinforced that the lack of indexation applying to the $3 million superannuation tax threshold means that instead of only 80,000 people being affected, as claimed by Treasury and the Government, as many as 500,000 people will be affected.

Amid questioning by the chair of the Senate Economics Legislation Committee, South Australian Labor Senator, Jess Walsh, Wilson Asset Management chief financial officer, Jesse Hamilton made clear that carrying forward losses was not an answer.

“I appreciate the Government’s position, but you could end up in the position where you never get to utilise that loss,” he said.

“You could end up where you never get to utilise if you are a retiree and you get taxed on unrealised gains ….. then you have lost a portion of your retirement savings to a tax that “should never have been due and payable to begin with,” Hamilton said.

“We’re talking about unrealised gains here but we could be in a real position where there could be people above the $3 million cap that have realised gains and income and can utilise an unrealised loss to lower their tax bill in those years because of the way the measure has been designed,” he said. “I cannot imagine that is the intent of Treasury or the Labor Party.”

“You are forcing people to recognise and pay a tax liability when they haven’t actually realised the asset so for someone who may hold property in their superannuation fund how do you propose that that might work?  Does the participant need to sell the asset to fund the tax liability if it has gone up in value?”

“I can’t imagine anyone sitting here today being happy if they owned an investment property which went up in value having to pay tax on an unrealised gain and that property’s value can fluctuate from year to year.”

“So, you don’t see the loss carry forward provision as being helpful?” Senator Walsh said.

“No, not unless it was refundable in actual cash to the participants, no, I do not think its effective.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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1 month ago

Using FSC’s logic, a lack of indexation applying to income tax thresholds means that eventually every taxpayer in Australia will have a marginal tax rate of 47%.

FSC may have thought their clever use of distorted logic and fallacious arguments was the reason for their success with LIF. But the real reason for that success was LIF aligned with the anti adviser ideology of ASIC and Treasury.

In the case of the $3M super tax, there is no such ideological alignment with ASIC and Treasury. FSC will need to learn how to use realistic data and well reasoned arguments if they want to be successful in their lobbying against it.