The giant superannuation win for middle Australia

It’s a giant win for middle Australia as capital gains tax axed on super.

Middle income Australia, including farmers and family businesses, held its breath. In the last Senate meeting for 2024, Finance Minister Katy Gallagher tried to pressure crossbenchers Jacqui Lambie and David Pocock into agreeing to support one of the worst taxes ever conceived by an Australian Treasurer — the unrealised capital gains tax on superannuation.

Lambie and Pocock had vowed to act in the national interest and oppose it. They stood their ground. Thank you Jacqui. Thank you David. But I extend the thanks to the wonderful readers of The Australian, who must share the credit with Lambie, Pocock, the Coalition and other crossbenchers.

All the way through the battle the readers have bombarded my commentaries with views and suggestions.

But the special heroes were the three ordinary Australian grandmas who showed me how this was an attack on middle income Australian families. They were real people who, attending a large football dinner, brought a new perspective on how the tax would hit the nation.

Finance Minister Katy Gallagher. Picture: NewsWire / Martin Ollman

Let me add to the drama. Press reports in The Guardian said that Anthony Albanese wanted the superannuation tax withdrawn because he feared it would become another franking credits episode.

Back in the 2018 election campaign, the then shadow treasurer Chris Bowen could have raised the money he needed with a straightforward change to franking credits. Instead he played games so some people were affected and others were not. Again the Australian readers played a big role in spreading word of the basic unfairness of the Bowen proposal. Partly as a result, Bill Shorten did not become prime minister.

Unlike Treasurer Jim Chalmers and Gallagher, Albanese has not forgotten 2018.

The unrealised capital gains tax was a mirror image of the franking credits disaster. Once again the money was probably available from a straightforward tax change that levied a 30 per cent tax on income earned by members on assets above $3m.

But the Treasurer tacked on a second tax – an unrealised capital gains tax levied on funds with a trigger that was not indexed. The tax would be imposed on individual members of funds, not the funds themselves, leaving the funds in danger of being taxed when securities were sold. It would be incredibly damaging to the nations’ equity markets, particularly smaller companies needing capital, and set a dangerous precedent.

Gallagher wanted the $3bn revenue and pushed to bring the legislation before the Senate. She could have had most of that revenue by simply staying with the base tax. Instead, she demanded unrealised capital gains tax be added.

Gallagher didn’t have the courage to force a simple super tax because the unrealised capital gains tax was necessary to help ALP mates in industry funds plus the tax office. Nether had the accounting systems required to supply the data.

I hope Gallagher doesn’t keep complaining about not receiving $3bn because it was available with sensible legislation.

Peter Dutton will be hoping the unfair tax remains part of ALP policy because it will take him a significant step towards becoming prime minister.

Ordinary Australians having been encouraged to save via super are getting very sick of politicians wanting to change the rules. And this time around by not indexing the trigger, the ALP was clearly aiming for Middle Australia.

The tax defeat also contained a lesson for those who fight battles in the political arena. It’s hard to win battles on pure logic.