The Self Managed Superannuation Fund (SMSF) Association and the National Farmers' Federation are calling on the Senate to reject the Australian federal government's proposed tax on superannuation funds valued over $3 million.
The organisations join eleven financial industry organisations including CPA Australia, Chartered Accountants Australia and in New Zealand, the Financial Services Council and the SMSF Association, in rejecting the proposal.
Peter Burgess, CEO of the SMSF Association, expressed disappointment at the Albanese government's decision to pass this tax through the House of Representatives, labelling it as "deeply flawed" and warning it could negatively impact thousands of farmers and small business owners.
“We are urging them to listen to the concerns raised by a growing number of constituents,” Burgess said.
“The combination of taxing unrealised capital gains and no indexation of the $3 million threshold will also have a devastating impact on the venture and start-up sectors that rely so 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.”
The tax, set to come into effect in July 2025, would include unrealised capital gains, which critics argue could cause financial distress for some superannuation holders.
In defence of farmers
David Jochinke, president of the National Farmers' Federation, highlighted that many farmers could be forced to sell their farms to cover tax obligations, despite not holding substantial wealth.
He referenced University of Adelaide research showing 13% of SMSF members affected could face liquidity issues.
Concerns have also been raised by retired judges and senior public officials over the tax’s potential impact on defined benefits pensions.
Jochinke said the NFF urged all senators, particularly cross bench senators, to listen to the concerns of farmers and small business owners about the proposed new tax.
“We are calling on senators to now do what is necessary to address the consequences of this bill on thousands of farmers and small business owners across the country,” he said.
Burgess emphasised that the legislation’s future rests with key Senate crossbenchers and urged them to consider the widespread concerns.
Consider concerns
The SMSF Association contends that taxes on superannuation should be applied only to actual profits generated from investments, rather than on the overall increase in the fund's value.
“Since the outset we have maintained that the only way of removing unrealised capital gains from the calculation of earnings is to ensure actual taxable earnings are used,” Mr Burgess said.
“Denying the option of using actual taxable earnings simply because some large funds are not able to track these earnings at a member level means the vast majority of members impacted by this tax will unnecessarily be forced to pay tax on unrealised capital gains.
“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.
“We urge the Senate – and especially the crossbench – to listen to these legitimate grievances and vote down this legislation.”
The House passed the bill unamended this week, despite proposed changes from independent MPs.