Australians flooded my readers comments on the proposed tax on unrealised capital gains on superannuation balances over an unindexed $3m.
The reader impact statements show just how disastrous this ill-considered world first tax will be on future generations.
As a result I devote my pre-Budget comment to extracts from my readers’ comments which tells us a lot about the society that the current government is aiming to create. It is the sulphur cloud over the budget.
The Senate Economics Committee last week endorsed the legislation, voting on party lines. The Coalition opposed, and the Greens criticised it for not being punitive enough!
Over to my readers:
• Young professionals like engineers, nurses, teachers will be hit by this tax because it isn’t indexed. Those who slag off at those with $3m in super now don’t realise that the vast bulk of them will end up with over $3m and will be trapped by because they can’t remove any excess from their super to avoid the tax. It’s young people who will be hit by it when they are still working. As usual, Labor counts on Labor voters not understanding basic finance and so not realising it is they who are targeted, not the rich.
• Imagine a farmer whose superfund owns the farm. He has a couple of good years, so pays unrealised gains. Then a five-year drought hits and his enterprise is essentially worthless. Will his unrealised gains be returned to him? What a terrible proposal by a woeful government.
• What about a super fund holding listed equities or property? It will destroy these markets too, and encourage eternal short-termism.
• This tax will disincentivise people from putting money away earlier to fund their own retirement. Instead, they will simply pile more into overvalued primary residences for the capital gain tax-free ride. That is a terrible allocation of scarce capital for the country.
• This proposed tax destroys value creation in a country where value creation in new technologies and non-ore or agricultural production is appallingly low. Another tax on productivity and another economic impost in growth
• The real intention is to drive out self-managed super funds. Labor hates self-managed superfunds. Labor want to push the pool of SMSF into the industry (union) superfunds, where they have control.
• The sleeper issue is one that Robert didn’t mention, and that is the precedent that this creates. I don’t believe that the tax on unrealised gains was driven by the super industry’s antiquated systems, but more likely by Treasury officials who saw the opportunity to set a precedent. In 2025, it taxes unrealised gains on super: Then why can’t we tax unrealised gains on share portfolios and investment properties?
Would supporters of the tax be comfortable in having their rental property or even their home taxed on the increase in value each year irrespective of whether they sell it or not?
• Having been taxed on an unrealised gain, there is no mechanism mentioned for the government to compensate an investor for an unrealised loss. There is no balance
• Those with larger super balances have locked up the money in a system and foregone spending. They have also taken risks. Changing the system after the event erodes trust and is not fair.
• This is a Socialist government coming after the money of the people who have invested in our country and, thereby, provided jobs for those who want one as well as provided welfare for those who don’t.
• It’s OK to pile any amount of money into your capital city houses for huge tax-free capital gains but thrifty saving into super according to the rules and that has to be hit with a new tax? No wonder we have misallocation of capital and a housing crisis
• I am already considering alternative investment structures such as discretionary trusts and companies, despite the rules not coming into place until July 1, 2025.
• What about those who have farms, illiquid assets, property related to running their business – all invested per longstanding rules? Paying tax on unrealised gains will lead to forced selling of productive assets used at the business level.
• If these rules had been in place in say 2020, then the mid-2021 spike in tech related stocks would have results in a large tax bill – but that’s well after the event and selling assets at a loss to pay tax on what was at the time an unrealised gain results in a big reduction in superannuation to fund retirement.
• If this rule comes in, every investment will have a 12-month horizon on it. It will completely destroy investment in this country.
• The policy might actually result in lower tax over time. Does no one realised that if there is a $100m fund out there then when that person dies and the money goes to their estate then the government will take 15 per cent to 17 per cent of that in tax (that’s $15m to $17m!). If the money is forced out of super prior to death, that tax will not be paid.
This issue will not die.
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