Taxing unrealised gains in superannuation, as proposed by the Treasurer, will not deliver the Hawke-Keating style reform that is desperately needed.
All Australians need a conversation about tax. To start, we need to be honest about what drives productivity and what destroys it.
Taxing unrealised gains in superannuation, as proposed by Treasurer Jim Chalmers, will not deliver the productivity reform that is desperately needed. It is a backward, distortionary measure that will stifle investment, kill innovation and reduce the very productivity growth he claims to champion.
In his National Press Club address last week, Chalmers invoked the Hawke, Keating and Howard eras – leaders who understood the value of economic dynamism. They also understood that real productivity comes from rewarding ideas and investment, not penalising them.
The proposed tax on unrealised gains does the opposite. It taxes paper wealth. It taxes growth before it’s realised. And it taxes the very behaviour we should be encouraging: long-term, productive investment in Australia’s future.
Chalmers says Australia needs more investment. However, this tax will cripple it.
We’re told this is about fairness. How fair is a system that taxes investors when markets rise … and leaves them exposed when markets fall?
Self-managed superannuation funds (SMSFs) are some of the last sources of true “patient capital” in Australia. They invest in start-ups, small-caps and emerging businesses – companies that create jobs and build future industries. These investments are risky, long-term and essential to our innovation ecosystem.
Taxing them on unrealised gains forces SMSFs to exit growth-oriented investments in favour of “safer” large-caps and yield-generating assets. That’s not reform. That’s retreat.
The result? A dangerous concentration of capital in large-cap stocks, less liquidity for small businesses, and a further drying up of the IPO market. Productivity doesn’t grow in a system where bold ideas can’t get funded.
We’re told this is about fairness. How fair is a system that taxes investors when markets rise, even if they don’t sell, and leaves them exposed when markets fall?
How fair is it to treat superannuation – the vehicle we use to reward long-term saving – as a short-term revenue tool?
Economists and business leaders have already panned this proposal, and rightly so. It breaks with global norms. It introduces volatility and uncertainty into retirement planning. And it discourages risk-taking, precisely the ingredient needed for productivity and entrepreneurship.
Chalmers is right about one thing: the budget needs structural reform. However, that reform must be sustainable, principled, and growth focused.
You cannot claim the mantle of Hawke and Keating while ignoring the productivity principle at the heart of their reforms.
If spending is outpacing revenue, let’s look at reining in waste before chasing politically convenient tax grabs. Let’s talk about broadening the base, simplifying the system and rewarding work and enterprise. Let’s consider incentive-based reform, such as smarter capital gains indexation, targeted investment allowances, or reducing red tape for small businesses.
Let us not pretend that taxing unrealised gains is serious reform. It’s a desperate fix with long-term costs. It undermines confidence, punishes investors and will reduce – not lift – our productive capacity.
The treasurer says he wants consensus. He says he’s open to all ideas. Yet when it comes to this tax – an idea rejected by many of the experts he wants at his roundtable – he’s not listening.
You cannot claim the mantle of Hawke and Keating while ignoring the productivity principle at the heart of their reforms: unleash private investment, don’t smother it.
If we want innovation, we must fund it. If we want growth, we must reward those who take risks to build it. And if we want productivity, we cannot tax it into existence.
