SMSF Association and NFF urge Senate to reject $3m super tax bill

The tax on super funds valued at more than $3m would be “disastrous” for thousands of farmers as well as small and family businesses, two influential lobby groups warn.

Some thousands of farmers who held their family farm through their super funds could be hit by the new tax, with some being forced to sell their farms and homes to meet the tax bill, the National Farmers Federation warns.

The Self Managed Superannuation Fund Association and the National Farmers’ Federation are urging the Senate to reject the federal government’s proposed tax on super funds worth more than $3m.

SMSF Association chief executive Peter Burgess, said on Thursday that the association was “disappointed but not surprised” at the move by the Albanese government to use its majority in the House of Representatives on Wednesday to pass a “deeply flawed” new tax on large superannuation balances.

He said the proposed new tax, which is set to come into effect in July 2025 on super funds valued at more than $3m, would be “disastrous” for thousands of farmers as well as small and family businesses which would also be impacted by the tax.

He said the federal government seemed determined to push ahead with the taxation of unrealised capital gains on super funds, “despite all the evidence about unintended consequences that have been presented since the tax proposal was first mooted in early 2023.”

The National Farmers’ Federation president, David Jochinke, warned that some thousands of farmers who held their family farm through their super funds could be hit by the new tax, with some being forced to sell their farms and homes to meet the tax bill.

He said these were not people with hundreds of millions of dollars in their super funds but were “hard working Australians who have worked hard to build their farms in order to pass onto the kids and grandkids.”

He said research by the University of Adelaide had shown that some 13 per cent of SMSF fund members who would be hit by the new tax regime would face liquidity problems in meeting their new tax obligations if the legislation was passed.

The proposed new tax has caused widespread concern among small business owners and farmers who have property in their super funds as well as people with self managed super funds nearing the $3m threshold.

It has also raised concerns among some retired judges and senior public officials who are paid defined benefits pensions which are effectively worth more than $3m.

There are also concerns that the introduction of a new tax on unrealised gains — as opposed to realised earnings on investments in shares and property — would set a dangerous precedent for future tax legislation.

Mr Burgess said the fate of the proposed legislation, which would tax any increase in value of super funds above $3m, was now in the hands of three key crossbench senators.

“We are urging them to listen to the concerns raised by a growing number of constituents,” he said.

National Farmers’ Federation president David Jochinke.

“The combination of taxing unrealised capital gains and no indexation of the $3m threshold 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.”

Mr Burgess said the decision to tax unrealised capital gains would “set 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.”

He said it was also a long established principle in Australia that tax thresholds were indexed.

The bill was passed by the House this week unamended despite proposed changes by independent MPs.

The SMSF Association is arguing that taxes on superannuation should only be levied on actual profits made on investments and not on the increase in the value of the fund.

“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,” Mr Burgess said.

“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.

“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.

“We urge the Senate – and especially the crossbench – to listen to these legitimate grievances and vote down this legislation.”

Mr Jochinke said the NFF urged all Senators, particularly cross bench Senators, to listen to the concerns of farmers and small business owners about the proposed new tax.

“We are calling on Senators to now do what is necessary to address the consequences of this bill on thousands of farmers and small business owners across the country,” he said.

The proposed new tax is being opposed by the NFF and eleven financial industry organisations including CPA Australia, Chartered Accountants Australia and New Zealand, the Financial Services Council and the SMSF Association.

Originally published as SMSF Association and NFF urge Senate to reject $3m super tax bill