Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
‘Bitterly disappointing’: SMSF group slams unrealised-gains tax
The government should drop its plan to tax unrealised capital gains as part of its proposed tax on super balances exceeding $3 million, the industry body representing self-managed superannuation funds (SMSFs) has argued in opposing the “bitterly disappointing” decision.
In draft legislation released Tuesday, the government confirmed the plan to double the tax for balances above $3 million from 15 per cent to 30 per cent will measure earnings as the changes in market value to a member’s total super balance (TSB). That calculation will capture unrealised gains, meaning Australian taxpayers will for the first time be taxed on unrealised capital gains, the SMSF Association argued.
“While the Association doesn’t support super members with excessively large balances receiving generous super tax concessions, taxing unrealised gains is not the answer,” said Peter Burgess (pictured), CEO of the SMSF Association, which has been a vocal opponent of the Labor government’s proposal. “It will give rise to many unintended consequences, defies long-standing principles of our tax system and will result in outcomes inconsistent with the stated objective of this new tax.”
‘Bizarre outcomes’
The government has said its plan to claw back tax concessions from high-wealth superannuants is meant to reduce lost tax revenue, Burgess noted. “It shouldn’t be to impose a new tax which, for some, will not only claw back those concessions but result in more tax being paid than would have been the case if there were no concessions.”
There could be scenarios, for example, where the inclusion of unrealised capital gains means members have to pay tax on super earnings that exceeds the highest marginal tax rate, he said, adding that the “tragedy” of the government’s plan “is that it could easily be avoided and still achieve its stated objective”.
“All that’s required is to simply remove unrealised capital gains from the calculation of earnings and use actual allocated taxable earnings as the measure of earnings,” Burgess said.’ “It would avoid the many unintended consequences and bizarre outcomes that will arise by combining two entirely different concepts of taxable income for the same entity.”
Using allocated taxable earnings would also avoid the complexities involved with having to exclude certain transactions from earnings calculations and the proposed system of carried-forward negative earnings, which Burgess called “convoluted”.
The draft legislation does provide “some wins” for the SMSF industry, including adjustments made to the definitions of TSB, withdrawal and contribution for purposes of the new tax, but it “stopped short of what we were hoping for”, Burgess said.
“The failure to exclude disability insurance benefits from an individual’s TSB in the same manner as compensation payments, and the add-back of amounts withdrawn as disability benefits or under a release authority for the payment of super-related taxes are glaring examples” of issues the SMSF Association would like to raise with Treasury, he said, criticising the two-week consultation period as too short.
