As detailed in the NFF's submission to the Senate Economics Legislation Committee, the pursuit of a simplified superannuation balance assessment remains a double-edged sword. The NFF flags that the convex upswing in land valuation, although unliquidated, could spawn a considerable growth in tax responsibilities for the unsuspecting farmer.
Advocating a safeguard for productive agriculture, the Federation makes a case for the exclusion of agri-assets from total superannuation balance calculations. By doing so, they argue, farmers could avoid an unwarranted fiscal load and the potential market entanglements that could ensue. Notably, leasing farmland is a mainstay retirement strategy for this demographic, highlighting the need for sensitivity in policy-making around such matters.
The ubiquity of self-managed super funds (SMSFs) in agribusiness, with upwards of 30% of Australian farming operations employing them as a means to manage and monetize real estate for post-career sustenance, was underscored in the submission. The standard modus operandi involves transferring farmland to a SMSF as part of legacy planning, where leasing agreements with the next of kin become a source for retirement revenue.
The NFF illuminates a critical divide between asset worth and its yield; while farm property might soar in appraisal, the monetary return remains modest. This equation positions farmers as 'landed gentry' of sorts, yet with liquidity constraints that could culminate in hardship under new taxing regulations. The potential recipe for conundrum is evident: should tax be tied to unrealized gains, it might outstrip, or severely dent, the farming retiree's annual income.
Adding to the sense of precariousness is the subjection of farming incomes to the vicissitudes of nature. Australian agriculture’s vulnerability to atmospheric pendulum swings means land value can surge abruptly—a landscape exemplified in a year-on-year meteoric median land price rise in 2021. Vast hikes in Queensland, Victoria, and Western Australia punctuate this volatility.
The NFF highlights an incongruence as the windfalls in land prices do not escort an equivalent ascent in leasing remunerations, thus risking exposure to heavy tax levies without a real elevation in farmers’ wealth. Moreover, the proposed refusal to index the superannuation cap may ensnare increasing numbers of farms within a higher tax bracket as time wears on, according to their analysis.
These alarm bells ring for a reconsideration of tax schemes on superannuation, proposing a recalibrated approach that would empathetically encompass the fiscal ecology of Australian farmers and maintain the sector’s stability.
