Super tax battle moves to Senate

Just a day after the success of the joint accounting and advice bodies in extracting changes to the TASA Code, the SMSF Association is ramping up calls for the Senate opposition and cross-bench to amend the Government’s $3 million super cap legislation.

The Government succeeded in ramming the legislation through the House of Representatives on Wednesday but the SMSF Association sees the critical element being the Senate where the Federal Opposition and key cross-benchers backed changes to the TASA Code of Conduct regulations.

The Federal Opposition has already signalled its willingness to amend the legislation but the attitude of key cross benchers is less clear although there is significant disquiet over the taxation of unrealised capital gains.

SMSF Association chief executive, Peter Burgess said association was disappointed but not surprised that the Government had pushed the “deeply flawed” legislation through the House of Representatives.

“In all likelihood, the fate of this Bill now rests in the hands of the Senate crossbench, and we are urging them to listen to the concerns raised by a growing number of constituents,” Burgess said

“Despite all the evidence about unintended consequences that have been presented to the Government since this tax proposal was first mooted in early 2023, it seems determined to press ahead with the taxation of unrealised capital gains that will be disastrous for thousands of primary producers and small and family businesses who will be impacted by this tax.”

“The combination of taxing unrealised capital gains and no indexation will also have a devastating impact on the venture and start-up sectors that rely so heavily on the SMSF sector for funding.

“At a time when we need to lift economic growth, these sectors are a critical driver of productivity, and we should be focusing on measures that encourage this growth rather than stifling it.

“The decision to tax unrealised capital gains sets a dangerous precedent for tax change in this country, overturning nearly 40 years of a tax practice that delineated between income and capital gains tax, with the latter only payable on the realisation of an asset. And indexing tax thresholds is a long-established principle.”

The Association acknowledged the support of independent members in the lower house who yesterday put forward the Association’s amendment to index the cap, and for questioning why actual taxable earnings cannot be used in situations where these earnings can be reported.

“Since the outset we have maintained that the only way of removing unrealised capital gains from the calculation of earnings is to ensure actual taxable earnings are used.

“Denying the option of using actual taxable earnings simply because some large funds are not able to track these earnings at a member level means the vast majority of members impacted by this tax will unnecessarily be forced to pay tax on unrealised capital gains.”

Although the amendment to index the cap was defeated in the lower house, the absence of indexation, and the rationale and consequences of taxing unrealised capital gains, is expected to be hotly debated in the Senate where the Government will need the support of others to pass the Bill.

“We have always maintained there are other ways of clawing back the superannuation tax concessions for individuals with large superannuation balances and taxing unrealised capital gains is not the answer.

“The fact that the Government is proceeding with this legislation means they are confident they have the support of the Senate, and we urge the Senate – and especially the crossbench – to listen to these legitimate grievances and vote down this legislation.”