By Mike Foley
Farmers could be stuck with unaffordable bills under Treasurer Jim Chalmers’ proposed tax for self-managed superannuation funds, as the agriculture sector warns that rural landowners who own valuable land would struggle to generate enough profit to pay their debts.
The tax is set to take effect from July with a 30 per cent tax rate on earnings for the portion above $3 million in a super fund.
National Farmers Federation president David Jochinke on his property located at Murra Warra, north of Horsham, in Victoria.
However, the Albanese government needs support from either the Greens or the opposition in the Senate to enact its reform, and farmers are demanding a rethink of the policy’s design.
Controversially for farmers, Chalmers’ tax will also apply to unrealised capital gains above $3 million, which represents a doubling of the current 15 per cent tax rate for superannuation earnings.
Many older farmers have placed their farms in a self-managed super fund and lease it to their children, which generates retirement income for their parents while the younger generation can build businesses.
National Farmers Federation president David Jochinke said many farmers would not be able to pay the increased tax bill.
He argued that the value of rural land, which has grown steadily for decades and shot up recently, did not necessarily reflect the earning capacity of a farming operation, as a high proportion of revenue is often gobbled up by costs.
“Taxing something that has only paper value, and no relation to your ability to pay that tax, is flawed. Farms will be sold and generations of farming discontinued purely on this decision,” Jochinke said.
“The fact that you’re asked to pay a tax on an unrealised gain, when due to seasonal conditions like current droughts and floods you are having a loss, is absolutely absurd.”
Tax advisers have warned, however, that while the “paper value” of unrealised gains of farmers’ land is rising, it could be more expensive to remove it from their SMSF.
Specialist tax group chairman at Bentleys accounting, Simon How, said farmers must weigh a range of complicated factors such as stamp duty, capital gains tax and the cost of financing a property repurchase against the cost of copping the tax hike.
“A farmer who’s already struggling for cash flow will have to find extra tax because that asset they’ve got sitting in the fund has, on paper, increased in value,” How said.
“It could mean quite a significant change in potential tax bill for a lot of people there [who move it] outside of the fund.”
The SMSF Association told the Economics Legislation Committee Senate inquiry that more than 17,000 super accounts hold farmland, and 3500 of those have more than $3 million.
Jochinke said Chalmers’ decision not to index the threshold to inflation would mean that thousands more farmers would be sitting on self-managed funds with balances that exceed the $3 million threshold in coming years.
Rabobank’s 2025 Australian Farmland Price Outlook, released earlier this month, found the median price per hectare for Australian farmland exploded recently, rising 79 per cent between 2020 and 2023. While prices corrected slightly in 2024 with a 6 per cent drop, they are forecast to grow 3 per cent a year until 2030.
A spokesperson for Chalmers said under the proposed changes there would still be a concessional rate of tax for those with more than $3 million in super.
“Under existing rules all super funds, including self-managed funds, are already required to be diversified and have sufficient liquid funds on hand to cover administrative costs, tax and other liabilities,” they said.
The tax is expected to raise $2.7 billion in its first full year of operation.
Treasury’s director of tax and transfer, James Thomson, told the Senate inquiry that the existing superannuation tax concessions are expected to keep rising and overtake expenditure on the age pension in the 2040s.
Parliament is due to resume on July 22. The opposition does not support the changes, while Greens leader Larissa Waters is expected to push for Chalmers to index the $3 million threshold. The Greens have also previously argued for a lower threshold of $2 million.
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