SUPER TAX
While I recognise that the intention of the Superannuation (Better Targeted Superannuation Concessions) Bill is to ensure that superannuation is used to save for a dignified retirement, I have serious concerns about the structure of the change, which makes it impractical and potentially unfair.
Even if this only affects a small number of people, as a matter of principle we need to ensure that changes we make are consistent with common sense approaches and fairness.
My concerns relate to taxing unrealised gains, not indexing the $3 million threshold and there being no transition period.
Taxing unrealised capital gains will create liquidity issues for taxpayers. It is unreasonable to expect taxpayers to fund a tax liability that relates to the appreciation in value of an asset when they have not sold the asset and received money with which to pay any tax liability.
The Government’s proposal would go against longstanding principles of tax law that only realised capital gains are taxable. It will create an undesirable and inappropriate precedent for future tax proposals. It could also disincentivise investments in long-term assets, instead incentivising a short-term approach to reduce liquidity risk.
It would disproportionately impact self-managed super fund holders and those with a large illiquid asset, like farmers.
The threshold should be indexed. $3 million seems like a lot of superannuation today, but $3 million in 2064 won’t look like it does now.
Not indexing the $3 million threshold has the potential to embed further intergenerational inequality. Younger people have a hard enough time as it is, without disincentivising them to save for their retirement.
Transitional arrangements should be included. People have made financial decisions based on the current tax treatment, which they may not have made had they known this change was coming. Because superannuation laws lock up people’s own money, we need to be extremely cautious about making changes without permitting people to rearrange their affairs accordingly.
The failure of this Government to listen to stakeholders and experts on this issue means we will end up with an impractical, complicated and unfair version of what could have been a perfectly acceptable policy.
I have no problem with putting a cap on superannuation tax breaks above a certain level. But it has to be practical and fair.