Labor's new plans for superannuation could have unforeseen consequences regarding capital gains tax on small super funds, according to investigations by financial advisory firm Crystal Wealth Partners.
Labor announced last week that annuity earnings greater than $100,000 would be taxed at 15 per cent, saying that it will only affect super assets of more than $2 million, or about 16,000 individuals.
However, Crystal Wealth Partners points out that the 15 per cent tax could hit funds that are invested in "lumpy" asset transactions such as property sales. Despite government projections, this could easily hurt superannuation accounts with less than $2 million in assets, the firm stated.
John McIlroy, Crystal Wealth Partners' executive director, called on the government to allow funds to carry forward any unused tax amounts up to the $100,000 threshold.
"This would have the benefit of smoothing earnings including capital gains across a number of years rather than hitting the fund with tax because of higher earnings in a particular year," he said.
Mr McIlroy told InvestorDaily that he does not think the capital gains tax implications have been thought through.
"[If Labor] were really trying to target the very top end it would be far simpler to tax the payments out of the funds than to tax the funds themselves," he said.
