As of 1 July, the new super tax legislation is meant to come into force, despite significant backlash from multiple stakeholders and the legislation not yet being passed through Parliament.
Even so, it seems likely that it will come to pass.
One of the most controversial aspects of the legislation is the lack of indexation to the $3 million threshold. While it is currently set to impact around 80,000 Australians, this could actually grow to hundreds of thousands down the line if this is not addressed.
Speaking on The ifa Show, Centaur Financial Services chief executive Hugh Robertson said Treasurer Jim Chalmers leaving out an indexation clause was “sneaky”, however, others definitely voiced much stronger opinions on the matter.
Echoing the concerns of many, Robertson drew on the government’s implication that they don’t need to include an indexation clause on the legislation because a future government can do that, and while this is technically true, their failure to even include a review period that could prompt this action has left many sour.
“My soapbox here is that they’re just saying, ‘Well, look, a future government can change rules if they want to.’ It’s surely so much better to do it now as you’re going to put it in. Put it in that it’s indexed,” Robertson said.
While the possibility of including indexation is not completely off the table just yet, Labor’s recent landslide win in the federal election means that they are able to charge ahead with their agenda with very little pushback in the Senate.
While many both within and outside financial services continue to voice concerns regarding the proposed tax, Robertson said that going ahead with it could erode Australians’ confidence in the super system as a safe harbour for their retirement savings.
“I want to have trust in the system. If I’m an Aussie and I’m putting money away for my own retirement because I want to be self-funded, that’s a noble purpose. And so I want to be able to go into a system where I have the confidence that you’re going to honour that system,” he said.
However, as the population continues to age, many have speculated that greater dependence on social service pensions from retirees could see Australia’s already struggling workforce bear the brunt of the costs through further taxation.
As such, Robertson said: “We should be trying to incentivise everyone to get money into a really concessionally taxed environment that’s going to fund the rest of your life so that you don’t need to, you know, pull on the public purse.”
He further criticised Labor’s plans to enact the legislation retrospectively from 1 July 2025 once it actually passes through Parliament, which is set to resume on 22 July.
“In my mind, and I might be wrong, but it’s a violation of a tax principle. It’s a violation of a handshake. And I always, I just never like that you could have then said, OK, going forward, this is the rule’,” he said.
“Obviously, that’s not going to raise you a heap of tax revenue now. It is not, but, you know, it is what it is.
“At the end of the day, I think what you are seeing is that the government’s kind of saying, ‘Look, the lowest for anyone on above-average wealth, the lowest tax rate we’re happy for you to have is 30 per cent’.”
Another key area of contention is that Labor’s proposition would see unrealised capital gains taxed, which Robertson suggested would introduce significant complexity to an already complex system.
This, he added, becomes particularly challenging when it comes to those holding non-traditional assets wherein liquidity is an issue, something that is far more common in self-managed super funds, which are set to be disproportionately impacted by the new legislation.
“The two big issues are it’s ridiculous to tax paper gains and actually how are we going to be able to implement that successfully? How are you going to deal with valuations on farms? How are you going to do valuations with antiques, stamp collections, etc,” Robertson said.
To hear more from Hugh Robertson, tune in here.
This sales champ might have a bit less funds under management to look after if people are forced to withdraw and likely just cash up.
Higher advice fees.