SMSF Association heads to Canberra to fight $3m super fund legislation

The SMSF Association is concerned the federal government could try to push the tax through with some last minute amendments.

Legislation could force super funds to sell properties and other assets to meet the new tax.

Representatives from the Self Managed Superannuation Fund Association will be in Canberra next week to lobby against the federal government’s plan to lift the tax on super funds worth more than $3m.

The association alerted members on Tuesday that the legislation, which has been passed by the House of Representatives, could be put to a vote in the Senate when federal parliament resumes on February 4.

The Association has been strongly opposed to the proposed tax, along with the National Farmers’ Federation and the Council of Small Business Organisations Australia (COSBOA). It warns that farmers and small business owners could be forced to sell their properties to avoid the impact of the tax if the legislation is passed and it comes into force on July 1.

SMSF Association president Peter Burgess told members there were concerns that the federal government could try to push through the legislation, which imposes a tax of 15 per cent of the increase in value of any super fund above $3m over the financial year, with some last-minute amendments.

“We need to remain vigilant, doing what we can to ensure the Senate crossbench remains opposed to this tax,” Mr Burgess told his members, who represent the self-managed super sector which has more than 1.1 million members.

“We will be in Canberra on February 4 to convey our concerns about ‘last-minute’ amendments, and to remind the crossbench once again of the far-reaching implications of this legislation,” he said.

“Any amendments proposed are only likely to delay or marginalise the impact of taxing unrealised capital gains and will come with considerable complexity and cost.” The SMSF Association, the NFF, COSBOA and other organisations have been lobbying strongly against the proposed legislation, warning that it has a disastrous effect on people who have put assets into their super fund including farms and business properties.

The legislation could force them to sell properties and other assets to meet the tax, which is being levied on any increase in value of the fund over $3m – not just realised gains or income.

The federal government is arguing that the new tax regime will only affect 80,000 wealthy super fund members, raising more than $2bn in a full year.

But critics say it has the potential to affect much larger numbers of people over time, particularly with the lack of indexation of the $3m threshold.

Federal Treasurer Jim Chalmers confirmed last week that the federal government was keen to push ahead with the tax.

The government unsuccessfully tried to put the Better Targeted Super Concessions Bill to the Senate before parliament rose for the Christmas break late last year, with several key opposition crossbench Senators, including Senator David Pocock, opposing it.

A motion was passed requiring that the legislation be considered on the first sitting day of parliament this year, which is February 4.

“Unless a motion is passed to defer this consideration (which appears unlikely), or the election is called beforehand, this bill will be brought to a vote when the Senate reconvenes as scheduled on February 4,” Mr Burgess said.

The Association said it still believed the government did not have the necessary Senate crossbench support to pass the bill.

“With an election fast approaching, doing a deal with the crossbench seems unlikely,” Mr Burgess said.

“But it is important to differentiate between attempts at horse-trading to secure crossbench support and substantive amendments presented as addressing their concerns.

“At this stage it is unclear whether the government will propose amendments and risk further political capital on a policy with so many unintended consequences and which sets a dangerous precedent for future tax reform.”

Mr Burgess strongly rejected suggestions from the Treasurer that there had been extensive consultations on the legislation.

“What the Treasurer described as ‘consultation’ was not genuine engagement but a procedural formality,” he said.

“It started with a fixed proposal to tax unrealised gains and not index the cap, and there was no deviation from these positions – despite compelling evidence of its potential deleterious impact on the wider economy.

“The absence of significant adjustments or receptivity to alternative views indicates that the consultation was merely a process to endorse a pre-decided policy position instead of a genuine effort to consider other views.”

He also rejected suggestions by the Treasurer that there were other parts of the superannuation system that were based on the use of unrealised gains.

“In some parts of the superannuation system deemed income rates are applied which differ fundamentally from taxing unrealised capital gains,” he said.

“By drawing a parallel between these distinct approaches, the statement confuses the public about prevailing financial practices within the system and how capital gains are conventionally treated and taxed, thus undermining trust in the system’s fairness and transparency.”

Mr Burgess said the new tax would introduce a level of liquidity needed by super funds over $3m to meet the tax, which was “far beyond what anyone could anticipate or plan for.”

He said the new tax would mean some fund members might have to prematurely sell assets to meet tax bills under the legislation.

He said this was “out of step with traditional practices where taxes are only imposed upon the realisation of a capital gain”.

“The abrupt and severe nature of these demands can disrupt financial planning across various sectors, placing undue strain on individuals and businesses unprepared for such drastic measures,” he said.

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Originally published as SMSF Association heads to Canberra to fight $3m super fund legislation