Super tax delays create further confusion for investors: advisers
As the debate over Labor’s new super tax remains hot, financial advisers suggest that implementing the changes within the proposed timeframe is now unrealistic.
Financial advisers are continuing to tell wealthy clients to sit tight as one the most contentious tax reforms in years faces implementation chaos and potential design overhaul.
The controversial new tax known as Division 296, which was due to come into effect six weeks ago on July 1, has yet to be passed in federal parliament.
The final shape of the super tax, which aims to put a new 15 per cent tax on earnings on amounts above $3m in super, will not be known until after Treasurer Jim Chalmers’ economic reform roundtable that begins on Tuesday.
Former Queensland state treasurer Andrew Fraser has offered a last-ditch alternative to the new tax, suggesting a hard cap of $5m on all money in super – a simple solution which could allow the government to sidestep taxing unrealised gains.
Super sector leaders such as fund manager Geoff Wilson and SMSF Association chief executive Peter Burgess continue to lobby for the new super tax to be reconsidered with a view to dropping any effort to tax unrealised (or paper) gains.
As the debate remains red hot, advisers suggest that implementing the new super tax within its proposed timeframe – with collection of revenue starting on July 1, 2026 – is now unrealistic.
“We’re looking at a logjam of issues with this tax,” Sonas Wealth financial adviser Liam Shorte tells The Australian’s Money Puzzle podcast.
“You’ve got to get valuations on properties and things like that. It’s often March, April, May of the next year that the financials are available. So, for example, if we’re trying to plan for this Division 296, if it’s coming in on 1st of July then in a lot of cases, we may not have the figures we need to work with until March or April next year. And that leaves us two months to the end of the year, because 30th of June 2026 is the crucial date on when that $3m cap applies.”
With no precedent for taxing unrealised gains in super, Shorte is also at pains to make it clear that Division 296 is an entirely new tax which will be paid personally by the member of the super fund. That means individuals will receive separate tax bills and they can be paid by the individual or the individual’s super fund.
Shorte says he’s advising most investors to sit tight and wait and see the final outcome of the legislation.
In common with most advisers, Shorte is struggling to advise investors on a tax where the final details are still unclear.
“The main thing to understand is that it’s the 30th of June, 2026, balance that decides whether you’re going to be affected by this tax. If you can do something before 30th of June, 2026, to get your balance below $3m on that date, you could forget about the tax completely,” he says.
Writing in The Australian in a personal capacity, Fraser, the chair of super fund Australian Retirement Trust, said: “My personal view is that we should consider a cap on superannuation balances alongside the proposed reform, or perhaps the answer to the shouting is a cap instead of the proposed reform.”
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