‘It will completely kill us’: VC sector slams super tax

• Why you should think twice about trying to avoid it
• 5 strategies to deal with the increase
• Chalmers remains defiant as pressure builds
• The little-known asset class set to soar
• Opinion: Chalmers’ super tax is very smart, that’s why it’s so cruel

With the Greens assuming the sole balance of power in the Senate after the election, and already on the record as supporting the new tax, there is no mathematical impediment to the government securing the numbers to pass the legislation.

“We will take a look at the details of that, and we want to be firm but constructive with this government,” new Greens leader Larissa Waters said on Thursday when asked how she would approach the legislation.

Jasper said the tax undermined efforts by LaunchVic to encourage people to invest in start-ups, as retail investors would normally do this through their super because it was usually their second-biggest asset after their house.

Please, Jim, think again

Newman, the chairman of Arcana Funds Management, said that it was fair for Chalmers to increase taxes on super, but not by taxing unrealised gains.

“Please, Jim, think again. If the tax has to go up, put the tax up [in a normal way by taxing actual gains]. It is unfair to put the tax on people in this way.”

Newman said that as a 62-year-old, he will make sure that he won’t have $3 million in his super account by the time he turns 65, the age at which he can withdraw as much as he likes.

And he expected his clients to do the same.

“The only people who are going to get hit by this tax are the people who took this government at their word when they said they would not change super.”

Peter Burgess, the chairman of the SMSF Association, said the government’s narrow focus “is blind to the vital connections between superannuants, small business owners, primary producers, and angel investors.”

Angus Kennard agreed that the tax would make it harder for tech companies to get funding.

“It’s going to be harder to raise money. You have to wonder what will happen to all the innovation and the start-ups,” Kennard said.

He said he was also concerned about the long-term effects of breaking a long-held taxation principle by taxing unrealised gains.

“Paying tax on something you haven’t actually got cash for is not a good principle.”

Former Labor prime minister Paul Keating is also opposed to the super tax policy, both on the principle of taxing unrealised gains and the refusal to index the $3 million threshold.

Jasper said Labor’s plan to tax unrealised gains directly targeted venture capital investments because of the unique characteristics of start-up investing.

“Venture capital has the characteristic of being completely illiquid. It’s not like trading stocks or even property – you can go and sell a house, but you can’t just sell a company” while it is being built up, said Jasper, who sold the Aconex tech company he co-founded to Oracle for $1.6 billion in 2018.

“And you’ve got long hold periods. So you’re holding something for sometimes 10 or 15 years … before you could sell it. But along that time, that asset might go up a lot, and you basically end up paying tax [if you tax unrealised gains] completely disconnected from when you can realise value from the asset.”

Jasper said superannuation had been the ideal home for venture capital investments because, like super, it was generally a long-term investment.

“I’ve put venture investments in my super fund. It was a good alignment,” Jasper said. “A lot of people saw super as a good place to put their venture investments … It will completely kill us … It will go from being a good place to a terrible place.”

The government insisted it could apply the impost to defined-benefit pensions. Figures obtained by independent Senator David Pocock, who opposed the legislation last term but is now powerless to stop it, suggested 10,000 defined benefit recipients in Canberra alone would be affected.

As Wentworth MP Allegra Spender stepped up her criticism of the policy, she was joined by fellow teal Zali Steggall, who called the proposal ill-considered and replete with unintended consequences.

Steggall said the refusal to index the $3 million threshold meant a lot more people would be affected than the government was saying, because more and more people would be caught in the net. She was also critical of the plan to tax unrealised gains.

“If one year the valuation goes over [$3 million] from a capitalised gains point of view, but the following year there is a loss, there’s no provision for … recouping that tax,” she said.

“Unrealised gains are just a gain on paper. You’re taxing something that only exists on paper,” she said

Kennard said his own family could be affected by the tax on unrealised gains.

“We’ve got a family vehicle that has a joint superannuation fund that owns properties that has a lifetime payment to my father in terms of rental. But the assets sit in four of our names that none of us have control over.

“And if that value goes up, then suddenly we have to pay tax on something that we’re actually not earning any income from.”

Kennard said he would have to find the money to pay the tax from somewhere else, in the same way that many other family-owned businesses might have to do.

That, in turn, could affect those businesses’ ability to employ more people.

“Cash is king,” said Kennard, who is also the chairman of the Family Business Association. “If that cash is going to the tax department, it is cash that is not going to something else that would grow your business.”

That would hit employment and investment, he said.

Kennard said a fundamental problem with the proposed tax was that it was aligned to how big super funds handled their investments rather than self-managed funds.

“One has lots of cash, potentially one doesn’t. One is short-term in terms of being able to pay it and one is long-term, where it is not paying it.”

But he said there was still hope that it could be stopped. “If there is enough uproar, it can be.”