I suppose it was all too predictable the proposed tax on total super balances above $3 million, or the Division 296 tax, would dominate superannuation discussions in the early part of 2025 and probably every week in the lead-up to the federal election, and this expectation has come to fruition.
And while the industry can sometimes have a habit of analysing issues to an inch of their lives, it’s the Treasurer who is the one who just can’t let this subject go.
To this end, Jim Chalmers came out on the front foot toward the end of January, declaring the measure is well and truly still on the table despite it having reached what is seemingly an impasse in the Senate.
But what was really insulting was his defence of the government’s procedural approach to the introduction of the Division 296 tax. So egregious were his claims, it motivated SMSF Association chief executive Peter Burgess to refute the Treasurer’s statements.
Firstly, Chalmers claimed the government has conducted “heaps of consultation” on the bill that confirmed the legislation in its current form is the best way to implement the new tax. There may have been consultation, but I can guarantee none of it endorsed the policy as it stands now. Shortcomings such as taxing unrealised capital gains and the lack of an indexation mechanism were identified almost as soon as the original announcement about the tax was made. But still there have been no amendments made to the proposal.
Next the Member for Rankin suggested the practice of taxing unrealised capital gains is already being followed in other parts of the superannuation system. To this claim, Burgess said deeming rates are used for tax calculations in the framework, but this differs greatly from taxing unrealised capital gains.
And finally the Treasurer basically said SMSF members such as farmers shouldn’t be complaining about funding the new tax liability as there is already a trustee obligation to ensure a fund has the requisite liquidity to fulfil its financial commitments. I would remind Chalmers this obligation is in reference to things like satisfying the pension payment standards should a fund have implemented an income stream. It has nothing to do with servicing the debt arising from a new impost where the receipt of income is completely divorced from the gains that are being taxed.
To me it is a demonstration of the continued stubbornness the government has demonstrated on this matter from the get go and its attitude of throwing up any justification for the measure in the expectation the public at large will accept it without question.
Worse still is the contemplation of the ultimate result we might all have to face if the bill somehow is approved. As I mentioned before, the bill in its current form seems to be at a total impasse in the upper house, which means the government is doing some desperate horse-trading in the background in order to get it through.
But can they really pull this off in the limited time before the election? Any successful back-room dealing will likely have to involve redrafting of the legislation and the relevant time constraints may not allow this to happen.
But the government is doing its best to avoid any legislation redrafting by trying to link the bill to the one removing credit and debit card surcharges. This has been seen as an attempt to shame the crossbenchers to have them painted as rejecting a critical cost-of-living measure if they refused to vote for the Division 296 tax as part of this bundle. Thankfully the move was spurned. It does make you wonder just what the government is prepared to do to get the Division 296 bill passed.
However, with few parliamentary sitting days remaining in 2025, I’m still of the belief any actions to have the bill approved will end up being a bridge too far. I have my fingers crossed this prediction will ring true as it would be the best result for all of us.
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