Super stoush: SME groups tell lawmakers to ditch new taxes on unrealised capital gains
Small business representatives are calling on federal Labor to formally abandon any new taxes on unrealised capital gains, fearing commercial property and farms could come under the crosshairs.
The Albanese government in 2023 announced its plan for a new 15% tax applied to the yearly earnings of superannuation balances of $3 million and above, effective from the 2025-26 financial year.
Assistant Treasurer Stephen Jones described the reform as a "modest adjustment" covering very few Australians, consistent with the purpose of superannuation -- providing income for a "dignified" retirement.
"If you think the current tax concessions are appropriate, then you will need to find those savings by cutting services somewhere else," Jones said in October last year.
"Our decisions mean we can go further to improve the equity of the system."
But critics argued the tax would effectively impose a new tax on unrealised capital gains held in self-managed superannuation funds (SMSF), a departure from established tax principles.
Ultimately, legislation putting the new tax into effect stalled in Parliament.
The federal Opposition stood against it, with Shadow Treasurer Angus Taylor last year calling it a "shocker" policy and an "unindexed annual tax on unrealised capital gains".
Independent crossbenchers including MP Allegra Spender and ACT Senator David Pocock aired their own concerns, fearing a tax on unrealised capital gains could unfairly penalise investors holding volatile assets.
Crossbenchers worried the proposal put forward by Labor could force those holding illiquid assets in their SMSF -- like commercial property or a family farm -- to sell those assets, just to pay off the tax bill caused by their increasing paper value.
Labor disputed this, with Minister for Small Business Julie Collins saying existing rules already require SMSFs to maintain liquidity to cover any prospective liabilities.
The independents also aired concerns that extra taxes on unrealised gains could deter angel investors from supporting Australian early-stage startups.
Despite the parliamentary hold-up, references to taxes on superannuation investments in the most recent federal budget put the issue back on the radar ahead of the May 3 federal election.
On Wednesday, industry groups including the Council of Small Business Organisations Australia (COSBOA) and the Family Business Association called on both federal Labor and the Opposition to formally strike off any further taxes on unrealised capital gains.
“Australia has a proud history of rewarding effort, enterprise, and prudent investment," according to the joint statement.
"A tax on unrealised gains turns that on its head.
"It punishes people not for what they’ve earned, but for what they might earn – and that’s a road no country should go down."
The expansion of tax on unrealised capital gains "punishes aspiration, destroys liquidity, and turns volatile market movements into tax bills," the groups added.
The SMSF Association and the National Farmers Federation also contributed to the statement.
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