Mercer actuary David Knox says the data used to determine the old age dependency ratio is “totally out of date” and overstates the severity of the problem.
From their inception, SMSFs have always attracted more than their fair share of criticism. Now it’s an ageing membership that’s being used to restrict their numbers.
‘Alarming precedent’: SMSF group urges crossbench to reject super tax bill
Stepping up its fight against the government’s plan for a new tax on superannuation balances exceeding $3 million, the SMSF Association has urged crossbench senators to reject the legislation, saying it’s bound to lead to “unintended consequences and erratic outcomes”.
Treasury introduced the proposed legislation, Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, to Parliament last week. Advocates of the self-managed superannuation fund (SMSF) sector have opposed the plan, which would increase the headline tax rate to 30 per cent from 15 per cent on for earnings on super balances that exceed the $3 million cap, since the government announced it, calling it unsustainable and discriminatory to SMSFs.
The SMSF Association has repeatedly called out one aspect of the proposed legislation in particular, the taxing of unrealised capital gains, as inequitable to SMSFs and an unnecessary change to tax policy.
“Taxing unrealised capital gains is a tax on market movements and changes in asset values, not income – an alarming precedent as it represents a fundamental change in how tax policy is implemented in Australia,” SMSF Association CEO Peter Burgess said.
“As the legislation is currently drafted, a person with a high superannuation balance, whose interest has received taxable income in a year, will not be subject to this tax if their Total Superannuation Balance (TSB) movement does not trigger this tax,” he added.
“Conversely, a person who has a one-off spike in asset values, putting them over the threshold, will be subject to this tax, with no tax refund or adjustment available where the value causes them to be below the threshold the following year.”
Moreover, by linking the tax to capital markets movements, members’ tax liability will be volatile from year to year, making it hard for them to manage liquidity.
“We remain deeply concerned that the $3 million cap will not be indexed, meaning the tax net will grow exponentially in the coming years,” Burgess said. “We’re also disappointed many of the technical anomalies we raised during the consultation phase have not been addressed in the legislation before Parliament.”
For instance, while he applauded the decision to exclude from the tax any individuals who die during a financial year, he contended that a major concern of the SMSF Association’s – that a person who dies on June 30 of a financial year will not be excluded – has not been addressed, so that’s still a possible outcome of the drafting.
“From the Association’s perspective, these are fatal flaws in the legislation, highlighting the need for a more careful and considered approach on this policy issue,” Burgess said.
In fact, he noted, the legislation’s main purpose is to cut down on large superannuation balances – an issue that has already been addressed.
“There are levers, via existing caps and measures, in place now that will limit the growth of disproportionately large balances in the future and address existing large balances over time,” he said. “The tax now being proposed will simply add further complexity and red tape to a superannuation system overburdened already with regulation.”
