Latest news with #unrealisedgains
Daily Mail
24-07-2025
- Business
- Daily Mail
The looming threat hanging over thousands of Aussie super accounts
Australians are bracing for a radical new super tax that could prove even more damaging for households if Labor bows to pressure from the Greens. Anthony Albanese was re-elected with a plan to impose a new 15 per cent tax on unrealised gains on super balances above $3million. The resumption of Parliament means the government will attempt to pass the law - backdated to July 1 - but it needs the support of the Greens in the Senate. The policy is radical because it proposes to tax the notional capital growth of assets during a financial year before they are sold, which could force self-managed super funds to sell the likes of farms and commercial real estate to avoid the tax. The new tax is different to an existing 15 per cent tax on earnings during the accumulation phase, which is paid to the fund without most workers noticing. The 80,000 Australians with more than $3million in super would have to pay an annual tax bill, which an individual would have to pay from their bank savings. The SMSF Association estimates 50,000 of these people are in a self-managed super fund and will therefore be affected by Labor's proposed new tax. The group's chief executive Peter Burgess said those with more than $3million in super would be forced to sell assets like commercial business premises to avoid this tax - creating severe cashflow issues for businesses with a self-managed super fund. 'They will need to find that money somewhere else because you're talking about a paper gain,' he told Daily Mail Australia. 'They haven't actually received that gain - the tax is based on that; it means they're going to have to dip into their savings or their reserves elsewhere in order to be able to pay this tax.' It comes as Greens leader Larissa Waters has hinted her hard-left party will be demanding an even tougher new tax on super. The party want the threshold lowered to $2million but indexed for inflation. It's expected to affect 104,141 super accounts or 0.6 per cent of retirement savers. 'We'll be having some good discussions with the government on that matter and I'm optimistic of a good outcome there, but I'll have those discussions in private,' she told the ABC's 7.30 program on Tuesday night. Host Sarah Ferguson didn't press Senator Waters on whether the Greens would insist on a lower $2million threshold. But Mr Burgess said it would be political suicide for Labor to agree to the demands of the Greens, at least on the point of the threshold. '[Labor] is holding their ground and they're not making changes - I would be very surprised to see the government reduce the threshold,' he said. 'That would be suicidal for the government to do that with all the controversy, exposing more people to the unintended consequences.' The Coalition and left-leaning crossbench senators David Pocock and Jacqui Lambie are opposed to taxing unrealised gains, which means Labor needs the support of the Greens in the Senate to get its tax division 296 legislation passed into law. The new super tax bill isn't expected to be introduced during this fortnight of Parliament, but the government is proposing to backdate it to July 1. Mr Burgess argued is was impossible for people to plan their financial affairs without knowing the final outcome of the bill. 'The government can argue, "Well, we've been talking about this tax for a few years now" but it's unreasonable to expect people to act on legislation,' he said. 'To backdate it to the first of July we think is completely unreasonable - if it isn't passed in this fortnight, then the earliest it will be passed is late August. 'We may see some panic selling - but certainly what we're saying to people is "let's wait until the legislation is passed".' Assistant Treasurer Daniel Mulino told the House of Representatives during Question Time on Wednesday this was a 'very modest measure'. 'If an SMSF has a farm or a business within the fund, that it should be receiving commercial, arms length payments from that business or that farm,' he said. Labor's Better Targeted Superannuation Concessions and Other Measures bill was first introduced in 2023, with Treasury calculating it will affect 80,000 people or just 0.5 per cent of super savers. Wilson Asset Management modelling predicted a failure to index the new tax would affect 5.4million Australians, aged 18 to 34, by the time they turned 67 and were able to qualify for the age pension. AMP warned Labor's plan to tax unrealised gains above the $3million threshold would affect the average 22-year-old worker in four decades' time.
Telegraph
15-07-2025
- Business
- Telegraph
I'm a successful entrepreneur. If Labour brings in a wealth tax, I'm out
To be crystal clear: if the UK implements a wealth tax many entrepreneurs like myself will leave the UK. It is unmanageable as an entrepreneur to pay tax on unrealised gains. Any entrepreneur trying to raise money on an equity valuation puts themselves and their investors in danger of a massive tax bill based on the theoretical, paper value of the business. Recently I completed a small acquisition. Part of the deal was for shares and we had to establish a relative value between the two companies. On paper, for the purpose of this deal my business was 'worth' £50 million. In the case of this deal, a 2 per cent wealth tax on wealth above £10 million could suddenly create as much as £800,000 tax bill for the shareholders – even though they did not receive any money in this deal. For high net worth investors, a 2 per cent wealth tax would make holding shares in a UK startup insanely risky. If the startup does a small strategic deal at a high valuation, they could find themselves owing a big tax bill without any actual gains. Take the case of Revolut, headquartered in London and now worth over £50 billion on paper. Some early investors, founders or employees could have tax bills in the hundreds of millions despite having no cash off the table. There is no way Revolut would have been able to achieve what it has done if every round of investment or stock option had to consider the implications of a wealth tax on unrealised gains. This proposed wealth tax will crush the UK startup scene. No serious entrepreneur or investors will want to grow a company in Britain. Any startup showing signs of being worth more than the wealth tax threshold will be told to get out while they can. This tax tips the risk-to-reward ratio of building a business in the UK out of kilter. The prospect of building wealth in the UK would be so much worse than many other places. In a globally competitive world, the UK would not be a viable jurisdiction to grow a startup and investors would look elsewhere. Leaving the UK is not hard for a digital business. Payments are online, workers are remote, very few things rely on a physical place. There are firms that specialise in supporting this type of restructuring. Many countries have discovered that the way to make more in tax revenue is to be globally competitive and attractive to entrepreneurs and investors. Dozens of countries offer special visas for entrepreneurs and investors. They are rolling out the red carpet with tax incentives, funding and business support. Entrepreneurs create jobs around them, growth in the economy and valuable innovations. If an entrepreneur leaves, all of that goes with them and existing taxes they pay in the UK drop to zero. When their big payday comes and they do realise the financial gains for their decades of hard work, the UK would see none of it. Dozens of the best entrepreneurs I know now live in Lisbon, Dubai, Milan, Malta, Hong Kong and Austin. Every month another great business builder is buying a one way ticket out. They move for two reasons. Firstly, the UK has become one of the highest taxed places to live. Not only are we taxed to the extremes just to live and work here, we also have the looming threat of sky high inheritance tax if we die here. Secondly it's the attitude towards wealth. Gone are the days when wealthy people in Britain were typically landed gentry gripping generational wealth from the battle of Hastings. Many wealthy people are self made; they start with nothing, delay gratification for decades to build what they have. The UK no longer celebrates this achievement, instead of being seen as wealth creators they are labelled as wealth hoarders. It's a stark contrast to many other places where aspiration and achievement are still celebrated. The advocates for a wealth tax never take into consideration the message it sends about Britain, signalling that this country is anti-wealth is a signpost that points towards widespread poverty. They also seem to ignore that the wealthy and the highly skilled have options – people respond to high taxes by taking measures to avoid them and in this case it would send some of the most productive citizens abroad. When people in the top 5 per cent who pay 50 per cent of taxes leave, their tax bills will fall onto the middle income earners. I urge the government to publicly state that wealth taxes are off the table before the mere threat of them causes more capital flight. The entrepreneurs are worth far more to this country than a 2 per cent wealth tax that appears to punish the rich but ends up punishing everyone else.
Daily Mail
30-06-2025
- Business
- Daily Mail
Why Anthony Albanese's radical plan for super will hit FIVE MILLION Aussies - not just 80,000 people Labor claims
Anthony Albanese 's plan to impose a new tax on super balances above $3million is likely to hit more than five million young Australians by retirement and not just 80,000 people as Labor claims, new analysis shows. The re-elected Labor government has the numbers with the Greens to get its Better Targeted Superannuation Concessions bill through the Senate when Parliament resumes next month. For the past two years, Labor has been arguing its plan to impose a new 15 per cent tax on unrealised gains on super balances above $3million, before assets are sold, would affect the top 0.5 per cent of super savers or just 80,000 people. This would take the headline tax rate to 30 per cent, as the new 15 per cent tax on unrealised gains was added on to the existing 15 per cent tax on earnings during the accumulation phase for all super accounts. Controversially, Labor isn't indexing it for inflation, arguing a future government could do so, like they periodically do for income tax rates. Wilson Asset Management has done new modelling showing this failure to index the new tax would affect 5.4million Australians, aged 18 to 34, by the time they turned 67 and were able to qualify for the age pension. 'All age cohorts under the age of 35 would be captured by the taxation on unrealised gains by retirement,' it said. The modelling showed Labor's new tax on super balances above $3million, known as tax Division 296, would even affect young Aussies with a zero super balance now. 'Our modelling indicates those aged 27 and under with a zero starting superannuation balance would exceed the unindexed cap before retirement,' it said. 'This has led to some characterising it as a "stealth tax", one that fundamentally alters the long-term investment incentives within superannuation.' A 19-year-old worker on a $54,088 salary, with zero super, would have $3.491million in retirement savings by 2071. Someone who is 20 now on a $66,768 salary and just $75,000 in super now would $5.197million in superannuation by 2072. Australians who studied longer before starting work would also be affected, with a 27-year-old worker with zero super, on a $90,315 salary now, like to have $3.098million in super by 2065. A typical income earner, now 34, with $180,000 in super would $3.5million in super by 2058. These Australians would face an annual tax bill in the hundreds of thousands depending how much their fund had growth during the previous financial year. Wilson Asset Management Management founder Geoff Wilson said young Australians would suffer in decades to come. 'The proposed tax on unrealised gains will not merely be a burden on individual superannuation accounts exceeding $3million, the failure to index means a 25- year-old who today starts with a zero-superannuation balance will be captured by the time they reach retirement,' he said. Wilson Asset Management warned that forcing those with a self-managed super fund to sell assets, to avoid going above the $3million threshold, would discourage investors from backing technology start-ups. 'The policy will constrict the flow of essential risk capital to the engine room of the Australian economy – our small and medium-sized enterprises (SMEs) and innovative start-ups,' it said. 'It is a policy that threatens to undermine the foundations of Australia's economic dynamism by inhibiting the very companies that drive innovation, competition, and future growth.' Wilson Asset Management has released a new discussion paper called, 'Critiquing the Proposed Taxation on Unrealised Gains in Superannuation.' AMP last month warned Labor's plan to tax unrealised gains above the $3million threshold would affect the average 22-year-old worker in four decades' time but Wilson Asset Management's modelling shows the effects would capture workers aged 19 to 34 now. Compulsory employer super contributions are rising to 12 per cent on July 1.
Daily Mail
20-06-2025
- Business
- Daily Mail
He's one of Australia's leading minds on super - and he's got a sensible idea about changing Albo's laws. But do YOU think Jim Chalmers will budge on his flawed tax grab?
Treasurer Jim Chalmers has declared Labor has a 'mandate' for a sweeping plan to tax superannuation before assets are sold - despite a warning it could amount to a new form of death duties. Labor needs the Greens' support in the Senate to pass its Better Targeted Superannuation Concessions bill that would see a new 15 per cent tax levied on unrealised gains on balances above $3million. The Opposition and superannuation groups are opposed to the idea of taxing assets in a self-managed super fund before they are sold, based on the paper or notional value of holdings. Labor's policy would mark a radical departure from the usual practice of applying the capital gains tax once something has been sold. Now a leading superannuation expert - Professor Robert Breunig, the director of the Australian National University's Tax and Transfer Policy Institute - has argued the government should consider a change to its proposal. Prof Breunig said the government should look into allowing the unrealised gains tax to be paid years later, when someone eventually sells an asset. He likened it to the standard practice of paying undue council rates after a house had been sold. 'If you're going to tax unrealised gains, I think you should be giving people the opportunity to defer paying the tax until they dispose of the property,' he said. 'That would be my preferred policy.' But Chalmers on Wednesday rebuffed a suggestion Labor would revisit the concept of taxing unrealised gains, even though someone inheriting a self-managed super fund could be left with a new tax liability. 'First of all, we're not changing the policies we took to the election,' he told the National Press Club. 'We've got a mandate for that change... What we're looking for here is an opportunity to build on the progress that we've made, including in the economy as you point out. 'We're looking for, not opportunities to go back on the things that we have got a mandate for, we're looking for new ideas.' 'Inheritance' tax accusations Labor's tax on super balances above $3million could effectively amount to an inheritance tax, along with a new tax on franking credits - or tax refunds for owning shares in a company that has already paid company tax. Senator James Paterson, the Opposition's finance spokesman, said the government needed to explain if taxing unrealised gains on super amounted to an inheritance tax by stealth. 'Labor's super tax grab has been on the public record for two years,' he told Daily Mail Australia. 'The Albanese Government should be able to fully explain the implications of their policy, including for people's wills. 'We should not be reliant on independent experts, the media or the Opposition to explain how this policy will work in practice. 'Jim Chalmers must be upfront about how his unrealised capital gains tax interacts with franking credits and inheritance.' A self-managed super fund can be passed on to a dependent or left to someone in a will. Professor Breunig said someone inheriting a self-managed super fund with more than $3million, upon the death of a parent, would effectively be paying a new form of inheritance tax with the 15 per cent tax on unrealised gains. 'Yes, sure it is, but that's true of a lot of our taxes - that's true with council rates,' he told Daily Mail Australia. 'It would be an inheritance tax if you were somehow paying back taxes on it - you inherit the liability.' A self-managed super fund, with a balance above $3million, would be subject to an unrealised gains tax if there was a property in the portfolio, under the government's Division 296 plan. That would be a departure from existing rules allowing someone to avoid paying the capital gains tax on a property they inherited, outside of a super fund. Prof Breunig said Treasury would benefit from being able to tax unrealised gains in a super portfolio, catching out those who left property in a self-managed super fund. 'Currently, we have a subsidy in the system that subsidies people passing out wealth to their children and you're kind of removing that subsidy,' he said. 'That is one of the attractions of the unrealised gains tax.' Future of the tax The Greens want the $3million threshold lowered to $2million but indexed for inflation. Prof Breunig said that would mean applying an unrealised gains tax to accounts typically producing an annual annuity, or guaranteed retirement living income, of $100,000. 'Two million's too low - how much money do people need to have a comfortable retirement?' he said. 'Now you're talking about a lifetime income stream that's more like $100,000, which for a lot of people isn't that much relative to how much they made in their lifetime.' Australian abolished inheritance taxes at a national level in 1979, with all the states getting rid of that tax by 1981. Labor's planned tax doesn't effectively levy a new charge on a superannuation fund balance being transferred to a loved one.
The Australian
10-06-2025
- Business
- The Australian
Super tax open to manipulation through property valuations: ASF Audits
You can now listen to The Australian's articles. Give us your feedback. You can now listen to The Australian's articles. Australia's biggest auditor of self-managed super funds, ASF Audits, has raised concerns about the manipulation of property and farm valuations in preparation for avoiding Labor's unrealised capital gains tax that would dent Treasury's estimates of revenue. Labor wants to introduce an unrealised gains tax on superannuation accounts of $3m or more without indexation while the Greens want the threshold to be $2m with indexation. The Australian Taxation Office is monitoring changes in behaviour of those who have such accounts, partly to check whether such changes might dampen the $2.3bn in revenue Jim Chalmers expects to collect in the first full year of implementation and $40bn over the next decade. As many as 1.8 million Australians could be caught by unrealised gains tax by the time they reach retirement. ASF Audits head of technical Shelley Banton, who oversees 50,000 self-managed super funds, said superannuants would be looking to avoid tax by securing valuations on properties, including farms, that helped them reduce the impact from the tax. 'As of June 2025, those who are above the $3m mark will want a valuation as high as possible, and then for the 2026 year, they will want a valuation as low as possible so that they're actually making an unrealised loss instead of an unrealised gain, and therefore they don't have to pay tax,' Ms Banton said. For those with accounts just below $3m as of June this year, 'they will want valuations which will obviously keep below $3m – that's where the valuations are going to be manipulated effectively, and we need to make sure that the methodology used in those valuations stacks up, so that we as auditors can actually sign off on our audit report'. Even tax returns for the 2024 financial year, where SMSFs can file late, may be incorporating such valuation manipulation. 'Maybe you don't want to start getting a higher valuation in 2025, maybe you want to start doing that in 2024, so then the valuation you get in 2025 doesn't look as suspect,' Ms Banton said. She added that, while there was always pressure on valuations around tax time, the unrealised capital gains tax 'amps up that pressure considerably … it's a big one'. Commercial property and farms will be in the firing line, especially where there have been no clear, comparable sales. Depending on what's possible with valuations, it might also lead some people to withdraw super, and 'if we've looked at what's happened to evidence in other countries when they've imposed this sort of tax regime, we've seen a lot of money not only exit the industry, but also exit the country', Ms Banton said. Auditor concerns have been raised about possible manipulation of property and farm valuations. Picture: Zoe Phillips One particular area of concern she raised was who would do the valuations. While licensed valuers have their code of conduct, some real estate agents may not. 'The valuations that probably won't be as difficult to manipulate are what's called 'kerbside valuations' that come from real estate agents,' she said. Australia's biggest valuations company, Herron Todd White, conducts about 550,000 property valuations every year. The company's managing director of commercial, agriculture and government valuations, Gavin Hulcombe, said valuations are going to be watched very closely. 'One of the big question marks will be whether they will be full valuations or desktop valuations,' he said. 'We think it should be full valuations because of the scrutiny they are going to get.' He said there had been substantial gains across property, particularly farms, which Labor had considered exempting. The latest annual valuation increases recorded by the Australian Property Institute show agriculture recorded the highest average annual return over two decades at 12.8 per cent, while industrial land returned 8.2 per cent, residential 7.7 per cent, and commercial 7.2 per cent. Mr Hulcombe is expecting a ramp-up in valuations after the new tax is introduced into the parliament. 'We have seen a big increase in inquiries, but not instructions yet, as most clients affected by this are waiting to see what the actual legislation looks like,' Mr Hulcombe said. Valuations can range from as low as $900 to more than $7000, depending on the size of the property, and some superannuants have asked who should bear the cost. Matthew Cranston Economics Correspondent Matthew Cranston is The Australian's Economics Correspondent based in Parliament House. He is an award winning journalist who previously covered the Trump and Biden administrations as White House Correspondent in Washington.
