This proposal seeks Senate approval and is designed as a progressive measure to replace the additional 15 per cent tax on earnings for those with superannuation balances over $3 million. WAM's submission highlights the exodus of capital seen in Norway, Spain, and Sweden when similar taxes on unrealised gains were implemented, arguing for a more equitable approach that taxes realised gains instead.
Key to this proposal is maintaining tax neutrality while encouraging long-term capital investment in crucial sectors such as start-ups and SMEs. The approach ensures that higher tax burdens are only applied to the profits realised upon the sale of assets, ensuring that the realisation principle of tax laws is not violated. The Progressive Super Surcharge scales with superannuation balances and offers a complementary tax offset to mitigate administrative costs related to system upgrades necessary for accurate calculation and reporting.
- Balances of $3 million–$6 million face an additional 15 per cent tax on realised gains.
- Balances of $6 million–$10 million face an additional 17.5 per cent tax.
- Balances of $10 million–$20 million taxed at an additional 20 per cent.
- Balances over $20 million subject to a 25 per cent additional tax.
The proposal does not alter the tax structure for the first $3 million of an account holder's superannuation, engaging the tax only when assets are sold for profit, including interest and dividend income. WAM stresses that this method promises more equitable burden distribution, primarily impacting those with more extensive super balances, and aims to improve the fairness of Australia's superannuation system.
The complementary tax offset, as described by WAM, aligns with the estimated costs in Division 296's explanatory framework, ensuring that the superannuation system itself, rather than taxpayers, absorbs these costs. The proposal provides that the detailed administration of the tax offset applies when superannuants file their annual tax returns, safeguarding the sustainability and efficiency of compliance funding.
Overall, WAM argues that this reform could modernise Australia’s superannuation framework to reflect fairness and economic efficiency, potentially raising more revenue than Division 296 without stifling investment appetite. Their research indicates that taxing unrealised gains could result in a substantial deadweight loss of approximately $94.5 billion, underscoring the necessity to revise current proposals to avoid significant adverse economic impacts.
