Farmers Federation raises the alarm over changes to the superannuation tax

A doubling of the tax rate for balances over $3m will have ‘far reaching consequences’ for farm businesses and rural communities, the National Farmers’ Federation believes.

National Farmers Federation chief executive Tony Mahar. Picture: AAP

Proposed superannuation tax increases are raising “alarm bells” in the agricultural sector, the National Farmers’ Federation has warned.

National Farmers Federation chief executive Tony Mahar said the proposed changes, which would see the tax rate on super double from 15 to 30 per cent for balances over $3m, would have “far reaching consequences” for farm businesses and rural communities. Under the proposed changes, the 30 per cent tax rate will be levied on the increase in value of the fund above $3m over the year – rather than on actual profits earned by the fund.

The move is expected to cause problems for farmers who have put rural properties into their super funds and could be hit with a tax bill if the value of their land rises over the year.

The federal government announced the proposals earlier in the year.

While a range of interest groups including the NFF and the Self Managed Super Funds Association raised concerns about the proposals in representations during the year, the release of the draft legislation this week saw the government stick with its original approach.

This has included the rejection of calls to see the $3m threshold indexed for inflation.

The government has argued that the new legislation will only affect 80,000 people with super funds and is designed to crack down on super funds with big balances. But the changes could hit the farming sector and small businesses particularly hard if they have put business properties and farms into their funds.

Mr Mahar said the proposed legislation had “failed to allay farmers’ apprehensions about the planned tax adjustments and their potential impact on agricultural operations”.

“While recognising the government’s efforts to address fiscal challenges, the NFF remains steadfast in its belief the legislation’s potential repercussions on farmers’ livelihoods and agricultural investments must not be disregarded for a quick budget win,” he said.

Mr Mahar said farming businesses were unique, with farmers often seeing their land as their primary form of retirement savings.

“Unlike regular salaried employees, many farmers do not make consistent superannuation contributions,” he said. “Instead, they consider their land holdings as their primary retirement nest egg.

“This practice is paramount in succession planning, where land assets are frequently transferred into self-managed superannuation funds (SMSFs) to facilitate retirement income for retiring farmers.” He said the taxation of unrealised gains on assets in the fund would pose “a genuine challenge for farmers”.

Originally published as Farmers Federation raises the alarm over changes to the superannuation tax