Why business doesn’t support Labor taxing unrealised gains in super

Labor wants to slap a 30 per cent tax on unrealised capital gains made in superannuation ­accounts worth $3m or more without any indexation. Here’s why business leaders are so aggrieved.

Vitamin mogul Marcus Blackmore said the mooted tax sent the wrong message to savers and superannuants. Picture: John Feder

Business leaders say Labor’s superannuation tax proposal is a damaging impost and fear the toll on unrealised capital gains could incite a broader backlash that threatens private investment in the economy.

Vitamin mogul Marcus Blackmore said the mooted tax sent the wrong message to savers and superannuants amid concerns it could open the door for the Albanese government to tax other assets such as residential property.

“Conceptually I think it’s wrong,” he said. “I think there’s not enough emphasis on reward for effort in this country.

“It’s not unexpected from Labor, but I can’t understand it.”

Labor wants to impose a 30 per cent tax on unrealised capital gains made in superannuation ­accounts worth $3m or more without any indexation.

Prime Minister Anthony Albanese and the Treasurer, Jim Chalmers in Brisbane. Picture: Asanka Ratnayake/Getty Images

The Greens are willing to back Labor but want the threshold to be lowered to $2m, which would leave 100,000 superannuants from day one paying the tax and eventually as many as 1.8 million Australians paying it if it remains unindexed.

Investment advisor Chris Monaghan said it was worried how the tax grab could creep into other asset classes beyond superannuation.

“Logically I think it’s a totally uncommercial situation put forward by people who haven’t a full time job in the commercial workforce,” said Mr Monaghan, investment committee chair at Quay Capital.

“As far as I can see it’s simply a revenue raiser from a government that’s spending too much money and needs to find ways to get more tax.

“It’s a way that Labor can tax wealthy superannuation funds and still get the votes of their constituents.”

The independent Parliamentary Budget Office released figures showing because the tax is not indexed, it will raise just $300m in government revenue in its first year, but grow to more than $2.4bn by its fourth year, and almost $7bn annually within 10 years.

All up, taxpayers will be hit with a $5.5bn bill over the forward estimates and almost $40bn over the medium term.

Treasurer Jim Chalmers has defended the tax, noting it was announced two years ago following consultation. “What we’re talking about here is a modest change that will only impact half a per cent of people with super balances over $3m,” he previously said.

Business leaders such as CSL chairman Brian McNamee have made unprecedented interventions in this election campaign to denounce Labor’s tax plans.

On Monday, Wilson Asset Management’s Geoff Wilson sent a letter to 130,000 shareholders saying he had concerns about the “significant negative impact of this tax on profits you may never ­realise”.

Mr Monaghan said the Coalition should be “more actively” opposing the change given growing anger over the scheme.

“I just think it’s appalling,” he added.

PrimaryMarkets executive chairman Jamie Green said it represented a tax on hypothetical profits.

“The investor has not received any cash benefit, and worse, the asset might later fall in value, leaving them taxed on gains that were never realised,” Mr Green said in a statement.

The Coalition is against the ­unrealised capital gains tax while some teal members of parliament are open to backing aspects of Labor’s policy.

Geoff Wilson has expressed his concerns about the impact on investors. Picture: Ben Searcy

In the US, former Democrat president Joe Biden wanted to ­impose a 25 per cent minimum tax on unrealised capital gains ­accrued by wealthy Americans but it was shot down by his own party and billionaire entrepreneurs such as Mark Cuban in the lead-up to the November election.

The Australian revealed last week that $25bn could be taken out of self-managed super funds by retirees wanting to avoid the new tax. That would leave a massive hole in funding important start-up businesses, which Mr McNamee said were crucial for bring new jobs and economic activity.

Veteran business leader Tony Shepherd has said Labor’s plan for an unrealised capital gains tax on super­annuation accounts was “outrageous”, akin to communism and would drive investment away from Australia.

Meanwhile, international tax law expert, K&L Gates’ Betsy-Ann Howe, said such a tax would not be viewed well both inside and outside Australia.