Super cash grab breeds mistrust

Taxing the rich never goes out of style for those on the left. New Australian Greens leader Larissa Waters has pledged to continue her party’s wealth-destroying ways and support the federal government’s proposed punitive taxes on high-balance superannuation.

The Greens will continue in their attempts to make things worse, however, by insisting the superannuation balance at which the new tax rules should apply be reduced to $2m, not Labor’s proposed $3m.

Unsurprisingly, the plan to tax paper profits also is being cheered along by many in the left-leaning media who choose not to grasp the likely impact of the changes. One economics writer argues the new tax is OK because wealthy people have plenty of money outside of super to pay the tax man. Others describe complaints about the tax plans as “wildly, pompously overblown”.

They have swallowed the government’s spin that it will affect only a tiny group of people, and reject bracket creep concerns as a problem for the future when with tax generally it is very much a problem for today.

As Judith Sloan explained on Wednesday, the failure to index the rate sends the strong message to those in the accumulation phase to walk away from further investing in superannuation as far as possible. The big issues for Jim Chalmers to digest are the likely unintended consequences that will result, something many commentators don’t understand or are unwilling to acknowledge.

This includes cash-poor small business owners and farmers who have used superannuation to hold property but have little by way of other assets to pay the tax man. The tax on unrealised capital gains also will be a damaging hit to investment in high-risk or volatile start-up companies, including renewable energy, that the federal government claims to encourage.

The likeliest unintended consequence is the Treasurer will find little in the way of unrealised capital gains to collect because those who are rich enough to pay the tax have already been well advised to move their funds into more tax-effective investments. The result will be an assault on self-managed superannuation funds, something the union movement will welcome, and a loss of confidence in superannuation more generally.

If the new tax becomes law, it simply will confirm the mistrust that many people have in government when it comes to planning for the long term. The only certainties are the Greens will always try to make things worse and the left-wing commentariat will always get it wrong.