Teals turn against new $3m super tax urging government to make amendments
The government’s struggle to get a new super tax over the line in parliament has received a setback with eight independent MPs joining ranks to call for urgent amendments.
The government’s struggle to get a new super tax over the line in parliament has received a clear setback with eight independent MPs joining ranks to call for urgent amendments to the bill.
In a move the group says will support farmers, start-ups and self-managed super funds, it wants the government to amend the most controversial aspects of the new tax, including the assessment of unrealised gains.
The crossbench group also calls for an amendment that will give investors the ability to defer the tax where assets are illiquid, such as property. The group is largely made up of the Teal MPs, including Kate Chaney, Zoe Daniel, Monique Ryan, Sophie Scamps, Allegra Spender and Zali Steggall, along with Helen Haines and Kylea Tink.
Legislation to bring in the tax, which imposes a new 15 per cent tax on gains on amounts of over $3m held in super, has been stuck in parliament for months.
Since the legislation was introduced, investment professionals have pointed to a range of issues relating to the tax – particularly the assessment of unrealised (or paper) gains, which is widely seen to be against a core principle of tax equity. Instead of taxing unrealised gains based on an elaborate formula the group has suggested a “deeming rate” be applied to relevant amounts. This approach is applied in relation to pension access through the deeming rate.
The delay in the introduction of the tax has also caused problems with financial advisers unable to give a clear line to investors over how the tax may or may not affect them.
Two areas are getting most attention. First, illiquid assets such as property or farms and, second, start-up investments where an investor may have to pay tax on the notional improvement of an asset that may never actually pay out a profit.
The application of the tax- known as Division 296 is due to begin next year on July 1 with the first collection from July 1 2026.
As advisers have struggled to find out how the tax might work, it has also thrown up a range of anomalies, especially in the defined benefits area.
As it stands there is already a 15 per cent tax due on super on amounts over $1.9m. The new tax puts another 15 per cent on amounts over $3m (per capita) creating a 30 per cent tax for the wealthiest investors in super.
Many advisers are reportedly telling wealthy clients to avoid using super for large amounts and to regard the proposed $3m threshold effectively as a limit.
But it is not easy for those with large illiquid assets in super funds who may have spent decades accumulating wealth in super on the understanding that new taxes would not be introduced.
There are also demands from the group to introduce indexation on the $3m threshold amount and to exclude agricultural land.
Spender suggests the current bill was “a policy fudge to accommodate the technical limitations of large funds when, in practice, the majority of high balances are held in SMSFs”.
The new tax will work similar to the Division 293 tax today – that is, it will be applied immediately and directly on an individual. It applies where you have to refund some of the tax concessions you received on super contributions because your annual income went over $250,000.
Growing old with a tax target on your back
Wealthier, older Australians will rightly contribute more to better aged care, but have self-funded retirees got a bigger tax target on their backs?
Bank interloper that will threaten the dominance of ‘big four’
In Europe, to ‘rev’ money has become as ubiquitous among the under-35s as to ‘google’ information and Revolut, the global neo-bank, is close to getting an Australian bank licence.