Changes mooted for super tax affecting thousands of farms heads to a vote

Parliament will vote this week on amended legislation that would increase the tax payable on superannuation accounts over $3 million.

A federal government proposal to tax unrealised capital gains that would ensnare thousands of family farms will be voted on in parliament this week.

The draft Bill introduces an additional 15 per cent tax on earnings on superannuation balances over $3 million, and would controversially apply to unrealised gains.

The “modest” change mooted for superannuation tax breaks was announced by Treasurer Jim Chalmers in February last year amid a backdrop of a trillion dollars of debt and growing spending pressure in defence, health, aged care and NDIS.

But The Tax Institute said any practical and financial impact of taxing a gain that was yet to be realised outweighed any perceived macroeconomic benefit.

“One example is substantial farmland that is vital to farmers operating their farming businesses,” it said in a submission to the Treasury.

The Financial Advice Association of Australia said the draft legislation would have “unfair and unreasonable consequences for particular superannuation members, such as farmers and small businesses”.

The Bill is set for a vote in the Lower House on Thursday. If it passes, farming lobby groups are expected to target independent senators still undecided about the legislation.

Senators David Pocock, Jacqui Lambie and Allegra Spender have raised concerns about the Bill.

The National Farmers’ Federation is calling for primary production assets to be exempt from the legislation.

NFF acting chief executive Charlie Thomas said older farmers often held their farm in a self-managed super fund and leased it to their children.

“We are extremely worried that the proposed increases in taxation rates, including the treatment of ‘unrealised gains’ on holdings, will increase the tax obligation so much that farmers may be forced to sell land assets to pay the tax bill,” Mr Thomas said.

“This may leave farmers with a terrible choice: sell the farm to meet these new tax and liquidity obligations or increase their lease rates so much that their own children and grandchildren can’t afford it and leave the industry.”

The SMSF Association estimates that more than 17,000 accounts held farming land and of these, more than 3500 would be impacted by the new tax.