Legislation increasing the tax rate on earnings from superannuation balances exceeding $3 million from 15 per cent to 30 per cent has passed the lower house without amendment.
The bill's future hinges on the support of the Greens and the Senate crossbench, with Labor relying on their backing to push it through.
The Greens had previously advocated for reducing the threshold for the heightened tax to $2 million.
The SMSF Association is now urging the Senate to reject the bill, which it describes as a deeply flawed measure that will have significant unintended consequences for individuals and businesses alike.
The association’s CEO, Peter Burgess, expressed disappointment at the government’s decision to move forward with the bill on Thursday.
“The fate of this bill now rests in the hands of the Senate crossbench, and we are urging them to listen to the concerns raised by a growing number of constituents,” Burgess said in a statement.
Another particularly contentious aspect of the new tax is that it will be applied to unrealised capital gains. Burgess warned that taxing unrealised capital gains without any indexation will significantly harm the venture and start-up sectors, which depend heavily on the SMSF sector for funding.
“At a time when we need to lift economic growth, these sectors are a critical driver of productivity, and we should be focusing on measures that encourage this growth rather than stifling it,” he said.
“The decision to tax unrealised capital gains sets a dangerous precedent for tax change in this country, overturning nearly 40 years of a tax practice that delineated between income and capital gains tax, with the latter only payable on the realisation of an asset. And indexing tax thresholds is a long-established principle.”
While the amendment to index the cap was rejected in the lower house, the lack of indexation, along with the reasoning and implications of taxing unrealised capital gains, is anticipated to spark intense debate in the Senate.
“We have always maintained there are other ways of clawing back the superannuation tax concessions for individuals with large superannuation balances and taxing unrealised capital gains is not the answer,” Burgess said.
“The fact that the government is proceeding with this legislation means they are confident they have the support of the Senate, and we urge the Senate – and especially the crossbench – to listen to these legitimate grievances and vote down this legislation.”
