Wayne Leggett: Don’t think the $3m super tax will | Australian Markets
Those of us concerned in financial companies are acutely conscious that the phrases “tax” and “superannuation” don’t precisely pique the curiosity of anybody who isn’t a fellow industry participant, particularly if these two phrases are used collectively.
However, if I’ve simply described how you sometimes reply, that is one time you need to make an exception.
The Federal Government has drafted laws that proposes that, in case your super steadiness is above a sure threshold — at the moment proposed to be $3 million, however the Greens are pushing for it to be $2m — not solely does the tax your super pays double from 15 to 30 per cent, however you will even be taxed on “unrealised gains”.
To clarify what which means, think about your super fund holds shares, as most do, and people shares have risen in price from the 80¢ at which they had been bought to be $1 at June 30.
This proposal would have you ever pay 6¢ tax on the elevated worth of the shares, regardless that you haven’t bought them. This means it’s important to pay the tax from different belongings within the super fund.
If the fund doesn’t have the assets to satisfy the tax legal responsibility, it could be pressured to promote these shares to pay the tax.
But, think about if the shares subsequently drop to 75¢ in July. Not solely have you ever really misplaced money on these shares, you’re being pressured to pay tax on the “gain” that was on paper at June 30.
Worse nonetheless, for those who can’t cowl the tax invoice with different fund belongings, you will be pressured to promote the shares at a loss to pay tax on a gain you by no means really made!
Leaving apart for a second the unfairness of such a proposal, the different vital unfavourable of this proposal is the administrative nightmare it will create.
As it presently stands, while you promote an asset, you pay capital features tax on the distinction between what you paid for it and what you bought it for, each figures being straightforward to document.
Under this new proposal, not solely will you need to document the buy and sale price, but in addition the worth at June 30 every year to find out how a lot of these “unrealised” features you will have paid tax on prematurely of while you really realise the gain. The administration prices for super funds will increase considerably.
If you’re, understandably, pondering “Well, I don’t have $3m (or $2m) in my super, so this won’t apply to me”, the laws particularly states that this threshold will not be listed.
That signifies that whereas it solely applies to about 0.5 per cent of super accounts right this moment, it will be paid by considerably more super members as every year passes.
Finally, in order for you the REAL “litmus test” of whether or not this measure is true or not, you solely should know that former Labor prime minister, and the man sometimes called the godfather of superannuation, Paul Keating, refers to this proposal as “unconscionable”.
There’s a petition circulating that calls on the Government to take away these measures from the laws.
Given that Treasurer Jim Chalmers has simply “doubled down” on his intention to introduce this tax, the time so that you can voice your disagreement is now!
Wayne Leggett is director of Paramount Financial Solutions
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