The accounting and financial planning professions have raised concerns that the legislation will result in a tax on unrealized gains. The opposition has signaled its support for these concerns, along with prominent members and senators who have voiced their objections in statements and parliamentary committees.
Both the SMSF Association and CA ANZ have called on the Senate cross-bench to oppose the legislation. The Coalition Liberal and National Parties, as well as One Nation, have also indicated that they are likely to listen to the advice of advisers and accountants.
Taxing Unrealized Gains
The SMSF Association's chief executive argues that taxing unrealized gains would have unintended consequences. They believe it would represent a fundamental change in Australia's tax policy as it would tax market movements and changes in asset values, rather than income. This approach creates an alarming precedent.
The current draft of the legislation exempts individuals from this tax if their Total Superannuation Balance (TSB) movement does not trigger the threshold. However, individuals who experience a one-off spike in asset values that puts them over the threshold would be subject to the tax, without the possibility of a refund or adjustment if the value falls below the threshold in the following year. This introduces uncertainties and difficulties in managing tax liability and liquidity.
Concerns About Indexation
Both the SMSF Association and industry professionals are deeply concerned about the lack of indexation for the $3 million cap. Without indexation, the tax net will expand exponentially in the coming years, potentially affecting more individuals than intended by the legislation.
CA ANZ, in addressing the issue, asserts that the government has shifted the goalposts, which could lead to unintended consequences. They urge Parliamentarians to reconsider, reject, or amend the legislation to mitigate these negative effects.
