An extended war in the Middle East would cause sharemarket turbulence in the weeks leading up to July 1, which shows just how unfair and bizarre the “Chalmers tax” on unrealised gains becomes when applied to the real world.
Assuming the tax passes the parliament, there is a good chance that on the cost establishment date of July 1, the Australian sharemarket will be lower than current levels.
That means the cost base for Chalmers’s tax on unrealised capital gains will also be lower for a great many people.
It’s true there is likely to be a fall in Australian interest rates, and that could result in a rise in interest-rate linked assets.
But the Reserve Bank is not due to announce its official rate until seven days after Chalmers’s cost establishment day, so lower rates will not have their full impact on capital values until after the cost trigger date.
There is a good chance of a tax revenue harvest a year later because the war may have ended. No where else in the world is there a government that taxes on the basis of world and local market fluctuations. And the fact that Chalmers’s tax is attached to a retirement savings pool adds to the foolishness.
Chalmers has cleverly set a trap for those whose superannuation balance falls below $3m at July 1 as a result of a market drop.
In that circumstance, if the market value calculated a year later, on June 30, 2026, rises above $3m, the cost base will be $3m.
As everyone apart from Chalmers and the Greens know, the main targets of this unbelievable tax are self-managed funds which finance the capital raisings of between 50 and 60 per cent of our ASX stocks and a vast number of aspirational entrepreneurs, especially technology linked groups.
And remember there is no debate about lifting the tax on income from superannuation balances above $3m from 15 to 30 per cent.
That can be easily achieved by doubling the current methods used to calculate the first 15 per cent tax.
The totally unnecessary Chalmers tax clearly has a wider agenda. All Australians should be fearful.
Chalmers will be feeling just a little uneasy at the appointment of current Treasury Secretary Dr Steven Kennedy to become Secretary of the Department of Prime Minister and Cabinet.
As head of Treasury, Kennedy has been an ex officio member of the Reserve Bank board since 2019. For most of that time the Reserve Bank governor was Philip Lowe, who has stated very clearly that there are much better ways of taxing superannuation funds than a tax on unrealised gains.
My guess is that most of the board members during Kennedy’s time at the Reserve Bank would have had a similar view.
When Kennedy takes over as head of the Prime Minister’s department there is a chance Anthony Albanese will ask him for the truth about Treasurer Chalmers’s tax on unrealised capital gains.
In public service Kennedy has the reputation as a person who when asked a direct question will tell the truth to the best of his knowledge. He will tell the Prime Minister the truth as he sees it. Without knowledge, my guess is that Lowe would never have made the statement he did without a wink from Kennedy.
At this stage few Australians understand how the tax works and that it is not a liability of the fund but rather any member of the fund (or funds) who has superannuation assets above $3m.
And so when a member’s superannuation funds above $3m generate a tax liability as a result of the unrealised gains tax, that tax is not a liability of the fund. Instead it’s a liability of the member, who can pay the amount from personal savings or is entitled to withdraw from the fund an amount equal to the tax liability.
Albanese was incredibly lucky that he faced a Coalition opposition that was incompetent in not realising the magnificent weapon they had in the Chalmers tax.
At the next election countless Australians will be impacted or set to be impacted in future years, and it will be a huge issue.
Kennedy will almost certainly warn Albanese of the danger. Whatever you think about Albanese, he is a magnificent election campaigner, and if Kennedy warns him of the future danger, he will take notice.
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