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The Australian
29-07-2025
- Business
- The Australian
The strategies Australians are using to avoid Jim Chalmers' new super tax
The Australian Business Network While the federal government hopes to add $2.3bn per year to its coffers from the incoming super tax, savvy Australians are preparing to implement strategies via self managed super funds (SMSFs) to circumvent its impact. It may leave the government well short of its $40bn collection target over the next decade. When federal parliament resumes later this month Labor will welcome three extra senators, boosting their numbers to 29. And with 10 green senators and a further 10 crossbenchers, the government will have multiple pathways to get the required 39 votes needed to pass the contentious Div 296 superannuation tax on super balances above $3m. With the commencement of this new tax on unrealised gains looking more like a case of 'when' rather than 'if', Sydney-based accountant Timothy Ricardo from Accounting Advisor Group says that the key to overcoming Div 296 tax is to bring forward family succession planning arrangements. 'Rather than wait until death to transfer wealth to the next generation, a retiree with over $3m in a self managed super fund might consider adding their children to the fund and start to build their member balance now,' Ricardo says. The way this would work is that the retiree would withdraw a tax-free lump sum from their account-based pension and gift it to the child. The child would then contribute the amount back to the SMSF as a non-concessional contribution. By utilising bring forward rules, the maximum a child could contribute to super is $360,000 in one financial year. 'For someone with $3.5m in super and two children, withdrawing two lots of $360,000 and having the children contribute it back to the SMSF, this would reduce the member balance out of the danger zone of Div 296 to $2.78m while the overall fund balance would remain at $3.5m' Ricardo says. Although the children would be in the accumulation phase and their member balance taxed at up to 15 per cent on income and gains, it sidesteps the annual taxing of unrealised capital gains under Div 296 tax. It was only in 2021 that the Morrison government increased the maximum number of SMSF members from 4 to 6, which conveniently allows more children and family members to participate in this strategy. What you need to know to beat Div 296 The first is that you must have reached a condition of release to be able to withdraw lump sum amounts from super. This usually means reaching age 60 and having retired. For people aged between 60 to 64 who are still working, a transition to retirement pension can be established and up to 10 per cent of the balance withdrawn each financial year as a pension payment. You also need to have a high level of trust that your child or family member will contribute the funds you gift them back to the SMSF rather than take the money and run. And to state the obvious, even when contributed back to the SMSF by the child, it forms part of their members balance, which may be inaccessible for decades if the child is aged in their 30's or 40's. Administratively, as each member of a SMSF must also be a trustee, the operation of the fund becomes more complex. All trustees will be required to sign off on documents such as the investment strategy review, minutes, resolutions, financial statements and tax return. The final challenge is having sufficient liquidity within the super fund to make withdrawals to give to your children. Although this may seem like a deal breaker for those with lumpy assets in the SMSF such as the 17,000 farmers with primary production land inside of SMSF, a recycling strategy can be executed which achieves the goal of transitioning super out of the higher balance parent's name into the lower balance child's name. Ricardo explains the circular nature of the strategy: 'Say a 65 year old retired farmer with a $4m farm in their SMSF only has $100,000 in the fund bank account. To build the member balance of the children, the farmer can withdraw the $100,000 cash from the fund, give it to the child who then contributes it back in the fund, replenishing the $100,000 SMSF bank account balance. This process can then be repeated over and over again until either contribution caps are reached for the child or the desired level of dilution of the parents member balance has been achieved.' It is important to remember that although much has been spoken about the new super tax and its adverse consequences for people with more than $3m in super, its wording has yet to be finalised. Labor does not have a majority in the senate and they may need to compromise with the Greens or crossbenchers, which could see amendments to the final bill. As such, the advice coming from tax, legal and financial advisors is to prepare strategies to mitigate the Div 296 tax, however keep them on ice until the final legislation is passed and comes into effect. James Gerrard is principal and director of financial planning firm Read related topics: Wealth James Gerrard Wealth Columnist
Sky News AU
01-07-2025
- Business
- Sky News AU
Leading fund manager accuses Albanese govt of ‘gaslighting' Aussie taxpayers over its contested unrealised gains tax proposal
A leading fund manager has accused the Albanese government of 'gaslighting' the Australian people by claiming only 80,000 people would be affected by its unrealised capital gains tax proposal. The Albanese government's proposal to double the tax rate to 30 per cent on funds in super accounts above $3 million has sparked fears for small business owners, farmers who hold properties in their self-managed super funds, and startup investors, who use SMSF's as an investment vehicle. Treasurer Jim Chalmers has claimed the tax would initially only hit 80,000 Australians, which even Assistant Treasurer Daniel Mulino conceded was not true, estimating about 1.2 million, or 10 per cent of taxpayers, will pay the tax within 30 years. However, Wilson Asset Management founder Geoff Wilson said he believes in 30 years' time more than half the workforce would be paying this tax on unrealised gains, predicting about 8.1 million Australians will be paying tax on 'imaginary gains' by 2055. 'Albanese and Chalmers are gaslighting the Australian people by saying it's only 80,000 people,' he told Mr Wilson said having to pay tax on profits you may never make seemed 'immoral'. 'Chalmers is so desperate to get it through and won't see logical sense - either he has a death wish and doesn't want to stay as treasurer or he wants to use division 296 tax for housing and other investment shares,' Mr Wilson said. He said the Albanese government had 'made all these promises and someone's gotta fund it', adding the tax was 'illogical' and 'badly thought out'. It came after Australian Council of Trade Unions secretary Sally McManus told Channel 9 the tax on unrealised capital gains on super balances above $3 million had 'got to be indexed' to ensure more people 'don't end up' falling into the bracket. 'But that's a very long time in the future,' she said. Newly appointed Shadow Finance Minister James Paterson said the policy was 'wrong in principle' and the Coalition would 'fight this every step." 'Unless the government was willing to walk away from the two key principles in this bill, which is taxing unrealised gains and failing to index the threshold, then there's no conceivable world in which we could support it,' Mr Paterson told Sky News on Tuesday.
Daily Mail
25-06-2025
- Business
- Daily Mail
Wealthy baby boomer's infuriating question about how Anthony Albanese's new tax will affect his $8MILLION in superannuation
A retiree with an $8million superannuation balance he shares with his wife has publicly asked how to arrange his finances to avoid Labor's proposed super tax hike. Under Labor's tax plan, Australians with more than $3million in super will pay an additional 15 per cent tax on the portion of their earnings above $3m. Given only an estimated 80,000 Australians have super balances above the $3m threshold, the new tax would currently affect about 0.05 per cent of the population. The limited scope and applicability of the tax hike hasn't stopped the country's top-earners from scrambling for advice on how best to shield their account balances. Enter the anonymous boomer who recently asked Sydney Morning Herald columnist Noel Whittaker whether his $8million Self Managed Super Fund (SMSF), through some eleventh-hour readjustments, could be spared the additional tax. The frugal fellow explained the facts as follows: the man, aged in his mid-to-late 80's shares the SMSF with his wife, with 58 per cent allocated to his account and 42 per cent to his wife's. In the 2025/26 financial year, they will both draw the minimum pension of nine per cent, totalling about $333,000. His first question to Mr Whittaker was: if they sold enough assets to bring the balance below $6million by June 30 next year, would they be exempt from the new tax? The answer: it depends. The tax is calculated per member, meaning if a single account held more than half the $6million balance, that account would be liable, he said. Assuming the pensioner reduced his personal super account to $3million on which he earned $400,000 over the next financial year, Mr Whittaker estimated the extra tax would cost him only $7056. His second question, which answered in the affirmative, concerned whether pension withdrawals affected the relevant balance for tax purposes. Mr Whittaker clarified that the tax only applies to the portion of a super balance over $3million. So, in his example, a balance of $3.4million would be liable to pay $7056 in tax. According to ATO data, the average Australian man has a super balance of $182,000 while the average woman has $146,000. Calculations by the Australia Institute estimate 97 per cent of Australians currently in the workforce will never have $3million in superannuation let alone the roughly $4.64million held personally by the boomer in question. Sympathies, then, were understandably in short supply among readers of the article. 'Accumulation of huge wealth with huge tax concessions and still not wanting to pay a fair share to fund a more equitable society doesn't seem right,' one user wrote. '$8millilon and they're whingeing abut paying just a little extra tax,' another user said. Another reader wrote: '$8million in super... far out! That is more than enough for two people to retire on. 'Super IS NOT an inheritance vehicle to ensure wealth is passed down the generations whilst paying the least amount of tax.' While few sympathise with the efforts of Australia's wealthiest to avoid the new tax rate, others have called out the fact the $3million threshold is not indexed to inflation. It's a position shared by the Greens, who Labor will likely have to rely on to secure the bill's passage through parliament given the Coalition's stated opposition. Economists estimate that, by 2040, a $3million threshold would be worth about $2million in today's dollars, meaning more Aussies will creep into the affected bracket. AMP economist Diana Mousina has been outspoken in her criticism of the decision not to index the bill, claiming it would eventually affect a wide swathe of earners. While the figures are widely contested, Ms Mousina calculated the average 22-year-old earning average wages for life would eventually reach the $3million threshold. 'Do you think that the proposed $3million superannuation cap tax won't impact you because the Labor government said it only impacts 0.5 per cent of people now? Think again,' she said.
Daily Telegraph
23-06-2025
- Business
- Daily Telegraph
How rentvesting helps young buyers enter property market
Millennials and Zoomers are tearing up the homeownership playbook, ditching the quarter-acre block in favour of something smarter — and far more flexible. Rentvesting, once a fringe strategy, is now going mainstream as more first-home buyers realise they can't afford to live where they want to buy. M R Advocacy director and buyers advocate Madeleine Roberts said the shift was being driven by affordability pressures and a sharper understanding of wealth-building. RELATED: Revealed: Bodybuilder's secret $7m+ Melb hide-out Vic bidding ban nears as tenants priced out Named: Cheapest Melb suburbs to buy home 'There's been a clear uptick in younger buyers choosing rentvesting, and it's largely out of necessity,' Ms Roberts said. 'Most entry-level buyers are priced out of the areas they actually want to live inm suburbs where the median house price is well above $1m.' Instead, they're renting in lifestyle-rich areas and buying investment properties in suburbs with better growth potential. 'They're arming themselves with the right information and realising rentvesting is a smart way to build wealth without giving up lifestyle,' she said. The M R Advocacy director said the strategy is especially popular among clients using self-managed super funds (SMSFs), with some choosing to buy property inside super for long-term gain. 'A lot of people are drawn to the idea of being in control of their financial destiny rather than relying on a fund manager,' Ms Roberts said. 'But the risks are real if you don't have the right strategy. 'Whether it's property or super, you can't just wing it.' OpenCorp chief executive Cam McLellan said the most successful investors were combining strategies and staying flexible. 'You don't have to choose super or property,' Mr McLellan said. 'Smart investors are doing both. That's how you future-proof, multiple levers working together,' Mr McLellan said. Mr McLellan said younger buyers often underestimated their potential. 'Too many buyers chase the wrong thing, it's not about the biggest house, it's about buying the best-performing asset and using your cashflow wisely.' Super Members Council chief executive Misha Schubert said super shouldn't be overlooked in long-term plans. 'Super is one of the most powerful long-term tools Australians have, but it's underused and under-understood by younger people,' Ms Schubert said. She added that super could complement newer strategies like rentvesting. 'Rentvesting shows how young Australians are finding smart ways to balance lifestyle and wealth creation. 'Super can play a part in that too, especially with voluntary contributions and tax-effective savings.' Even as buyers rewrite the rules Ms Roberts said flexibility, information and strategy are the new pillars of the new Great Australian Dream. 'We're heading in that direction,' Ms Roberts said. 'Property is more expensive, but people still want to participate in the market and rentvesting gives them a way to do that without giving up on lifestyle.' 'It's adaptable, it's flexible, and it's increasingly popular with younger Australians trying to get ahead.' Sign up to the Herald Sun Weekly Real Estate Update. Click here to get the latest Victorian property market news delivered direct to your inbox. MORE: Developer's bold plan for $50m Melbourne site What sold this hero cop's family home Melb buyers heat up market in cold snap
Sky News AU
19-06-2025
- Business
- Sky News AU
Treasurer Jim Chalmers 'pouring cold water on investment' with Labor's proposed unrealised gains tax, Geoff Wilson warns
Treasurer Jim Chalmers is 'pouring cold water on investment' and 'penalising' Australians taking on financial risk through Labor's proposed changes to superannuation accounts above $3m, a leading fund manager has warned. Mr Chalmers on Wednesday vowed a boost to Australia's productivity and deliver major tax reform in a speech to the National Press Club. His promise drew criticism from Wilson Asset Management founder Geoff Wilson, who lambasted Labor's plans to alter how large superannuation funds are taxed - which includes targeting unrealised capital gains. "You can't say the economy lacks dynamism and innovation, then introduce a tax that penalises long-term investment and risk-taking,' Mr Wilson told 'Taxing unrealised gains in superannuation does the opposite of what's needed — it punishes prudence, discourages capital formation and undermines confidence in the rules of the game. 'The Treasurer admits we need more innovation — while taxing the very gains that fund it. 'You can't light a fire under the economy by pouring cold water on investment." A common criticism of the plan to tax unrealised gains on assets – including properties and shares – above the threshold in super funds is the impact it will have on small businesses. Many small business owners put assets in their self-managed super funds (SMSF), but under Labor's plan those above the threshold would be forced to pay tax on paper gains. Similarly, some investors use their SMSF as a low tax investment vehicle for startup businesses. Wilson Asset Management sent a note to shareholders warning if the tax were applied to a company like US$40b design platform Canva, which achieved its massive valuation after 18 funding rounds, the company would have failed. 'Under taxing of unrealised gains every funding round would require tax to be paid on a hypothetical valuation,' the report reads. 'Most startups operate with negative cashflow and when capital is raised it is to fund growth, not to provide liquidity to investors. 'Therefore, there is no liquidity to pay tax on an unrealised gain.' Labor's changes to super accounts $3m will also not be indexed and capture more and more Australians over time. AMP's chief economist Shane Oliver said the lack of indexing across the tax system, including under Labor's proposed super tax changes, was something the government needed to change. 'We should be looking at removing areas where, as far as possible, we're not indexing,' Mr Oliver told 'The ideal should be indexing things, not leaving more parts of the tax system unindexed and at the behest of what future governments might do.' The government insists its super change affects only the top 0.5 per cent of accounts, however, modelling from AMP deputy chief economist Diana Mousina suggests otherwise. 'An average 22-year-old today, who's earning average full-time earnings, will hit the cap when they get to about 62 years old on my analysis,' Ms Mousina told Sky News. 'So that's before they actually reach retirement.' She warned the government's failure to index the $3 million cap means growing numbers of Australians will eventually be drawn into the tax net. 'My estimates were actually, I think, understating the amount of people that will hit the cap because I used quite low return assumptions,' Ms Mousina said. She also flagged broader economic distortions that may result from the policy as people try to find a way around the taxes. 'If people know that their super is going to be hit, then inheritances will go elsewhere,' she said. 'More people will probably go to purchase a home, which has implications for home prices in the future. 'So people will find a way around this system to try and reduce their taxable income as much as possible.'
