By Phillip Coorey
Teal independent Allegra Spender is working with crossbench senator David Pocock and others in a bid to stop the government taxing unrealised gains as part of its planned tax rise on superannuation accounts worth more than $3 million.
At the same time, the lobby group for self-managed super fund holders has met Senate crossbenchers in Canberra this week with a proposed amendment that would strip out the taxation of unrealised gains.
The SMSF Association is proposing a model that uses a deeming rate, tied to the 90-day bank bill rate, to calculate earnings on the proportion of a super fund above $3 million that would be subject to the new extra 15 per cent tax.
Under an example provided by the association, somebody with a $5 million super balance at June 30, 2026, and whose fund returns 10 per cent for the year, would have a balance of $5.5 million at June 30, 2027.
Based on a 4.2 per cent deeming rate, they would pay $14,316 in extra tax for that year, rather than $34,088 under the government proposal.
SMSF Association chief executive Peter Burgess said, “the difference between the tax outcomes is essentially the [removal] of taxation of unrealised capital gains”.
Mr Burgess presented the proposed amendment on Tuesday to crossbench senator Jacqui Lambie who, along with Senator Pocock, has strong reservations about the taxation of unrealised gains, especially given the effect it would have on illiquid assets such as properties, family farms and start-up investments.
The lower house teals have similar concerns about taxing unrealised gains, and they are also concerned by the refusal of Treasurer Jim Chalmers to index the $3 million threshold above which the 15 per cent additional tax will apply.
This will ensure revenue from the tax increase, which is budgeted to raise $2.3 billion in 2027-28 in its first full year of receipts collection, will grow rapidly as more people are caught in the net.
The teals will move amendments in the lower house, but they have no sway as their votes do not count.
So Ms Spender has already started working with Senator Pocock on trying to effect changes in the Senate, where it is likely the government will need the support of two of either senators Pocock, Lambie or Tammy Tyrrell.
Ms Spender told The Australian Financial Review that taxing unrealised gains was not only bad policy that would set a bad precedent, she was particularly concerned about the effect on angel investors.
“Untaxed gain in the tech sector is a real concern to me,” she said. “Super is a significant contributor to angel investment.”
She said while there was support in general to tighten the tax treatment of high-value super funds, the bill as proposed was flawed.
It is understood fellow teal Kylea Tink will move an amendment to index the $3 million threshold.
Ms Spender said if the amendments were not adopted, as is likely, “I will vote against it”.
Other problems with the bill include how to apply the tax rise to the generous defined benefit pensions paid to retired politicians and public servants who were employed before 2004, including the current prime minister, Anthony Albanese.
And retired judges, whose pensions are already taxed, say they will be double taxed in retirement due to a proposal to add their annual pension to the balance of their super when determining the $3 million threshold.