By Phillip Coorey
Leading fund manager Geoff Wilson says the Greens’ proposal to increase the earnings tax on high-value superannuation accounts is fairer than Labor’s policy, but he maintains that under no circumstances should unrealised gains be taxed.
Wilson, the chairman of Wilson Asset Management, has been talking to the Greens ahead of the resumption of parliament next month, when Labor will move to pass its bill doubling the tax on superannuation balances above $3 million.
He is seeking to impress upon the minor party that including unrealised gains in the tax net would “tax innovation into oblivion” by affecting more than 55,000 start-ups a year.
The government claims no more than 5 per cent of venture capital investment comes from self-managed funds.
Treasurer Jim Chalmers is refusing to index the $3 million threshold and insists the new 15 per cent Division 296 tax also applies to unrealised gains, affecting assets such as farms, shares and businesses held in self-managed funds.
The Greens, who support high taxes on superannuation, are proposing instead the threshold be reduced to $2 million but that it also be indexed.
Separate analyses by The Australian Financial Review and the Financial Services Council both show that while the Greens proposal would hit many more people up front, Labor’s would hit more over the long run because of the refusal to index.
Assuming an average inflation rate of 2.5 per cent, the Greens policy would become less punitive than Labor’s after about 16 years and negate economists’ concerns that average wage earners could be inadvertently caught by the increased super tax within a few decades.
The FSC estimates that of 504,000 current workers who would incur Labor’s tax at retirement, 204,000 are currently under 30, and another 136,000 are aged between 30 and 34 years.
If the government adopted the Greens’ proposal of a $2 million threshold that was indexed, just 201,200 current workers would be affected when they retire, of which 50,000 are currently aged under 35.
Wilson said his preference was for no new tax to be introduced, but if that was unavoidable, then the government should adopt the Greens’ proposal because “it’s a lot fairer for young people”.
But he drew the line at unrealised gains. In a 32-page document to be circulated to clients, Wilson claims “$19.7 billion in taxation revenue could be lost from start-ups if we tax unrealised gains as a funding source that supports small companies”.
“Each year 55,096 corporate start-ups are likely to be captured by the
taxation of unrealised gains. We estimate $444.3 million per annum in lost taxation revenue will occur once these companies reach the mature stage of the S-Curve,” it says.
Teal independent MP Allegra Spender also cites the impact on innovation and start-ups as central to her opposition towards the new super tax.
However, the government, citing published Australian Taxation Office data contends that almost 90 per cent of SMSF asset allocations are invested in traditional asset classes such as shares, trusts and managed investments, cash and term deposits, and property.
In contrast, the proportion of total venture capital investment from SMSFs was around 5 per cent in 2023-24.
