A government cash grab on our super?

[Murdoch]

Just picked up a paper at an airport and it’s being reported that the tax may apply to unrealised capital gains. This was alluded to yesterday and why I asked the question above. If this goes ahead will be interesting to see if losses can be carried forward to surplus years for tax purposes. Will be plenty of work for accountants and estate planners/financial advisors in coming months and years….

[chevy1956]

The current discussion doesn’t seem unreasonable to me. They’re not planning to pinch our super, merely to tax any income from super funds that are above $50,000,000 or maybe even $5,000,000. As you can’t have more than $1,700,000 in retirement/pension phase, the pension income would still be tax free, and the other money in accumulation phase would have a tax that would still be less than it is if it wasn’t inside super, rather than the current 15%.

I think it's a good thing. I think it's 3 million and I'm cool with that. If you can't live extremely well with 3 million in Super plus owning your own house there is something wrong with you. That is elite level wealth. I assume I'll inherit and have that much money and if I can't hide it in Super I still think it's a good thing.

I can't even justify giving my kids that much money.

[chevy1956]

Seriously, $3m is not a lot of money to support a couple on for 30 years of retirement.

It's a huge amount. It's ridiculous. Plus you don't have to put it all into Super. You put 3 million in Super and the rest doesn't get tax concessions.

[Gremlin]

Just picked up a paper at an airport and it’s being reported that the tax may apply to unrealised capital gains. This was alluded to yesterday and why I asked the question above. If this goes ahead will be interesting to see if losses can be carried forward to surplus years for tax purposes. Will be plenty of work for accountants and estate planners/financial advisors in coming months and years….

Can you share a link? Would like to read.  I haven’t heard anything from official channels that this would be the case so not sure if it’s just a media beat up or genuine. 

I don’t know how that would work in practice - the property in your SMSF has gone up in value, therefore you need to liquidate it to pay your unrealised CGT. But by selling, you can offset your selling costs, in which case you no longer have a capital gain, in which case you no longer need to sell it, but then it’s gone up in value so you need to liquidate it to pay your unrealised CGT…

[Murdoch]

Article in the Australian by Patrick Commins. May be fear mongering but when there’s lack of clarity there is plenty of room to stoke such fears.

[Gremlin]

Article in the Australian by Patrick Commins. May be fear mongering but when there’s lack of clarity there is plenty of room to stoke such fears.

Thanks for that.  By my take, what he's posited bears little to no resemblance to the policy that's actually been announced.

[Murdoch]

Found this: https://ministers.treasury.gov.au/sites/ministers.treasury.gov.au/files/2023-03/better-targeted-superannuation-concessions-factsheet.pdf
Here: https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/superannuation-tax-breaks

My read of this is that unrealised capital growth is included in earnings for the financial year and therefore will be taxed.
It is fair to ask how would someone pay a large tax bill on non liquid assets that experience significant unrealised gains in a single year?
Doesn't look like fear mongering at all, and is a significant departure in Australia's approach to capital gains tax.

[deborah]

Thanks for that Murdoch, those papers are an interesting read, and they certainly do include unrealised capital growth. Hopefully, that aspect will be removed before it becomes law. It’s interesting that payments can come from other accounts even accounts from outside super. At least they’ve got a couple of years to sort out the legislation and the ATO system changes.

I hope they don’t make the botch of it that the $1.6 million cap legislation did - the way that was implemented, and the tooing and froing up until the very last minute was staggering! Even less than a month before the final cutoff everyone had the actual information wrong so you couldn’t calculate your cap correctly - the ATO had different information in different places, the politicians said different things on different days, and the media did too. And it was even worse afterwards, because the ATO systems didn’t seem to get the correct information for many months and kept on sending out nastygrams. But at least it finally got sorted out.

[jaysee]

I'm a bit concerned about the effects of inflation.

$3M might seem to go a long way in 2023, but will it go as far in 2043?

According to a good number of economists, the Western world can expect elevated inflation over coming decades.

Assuming your time horizon is 20 years or longer, shouldn't you be concerned about the super cap not keeping pace with inflation?

[middo]

I'm a bit concerned about the effects of inflation.

$3M might seem to go a long way in 2023, but will it go as far in 2043?

According to a good number of economists, the Western world can expect elevated inflation over coming decades.

Assuming your time horizon is 20 years or longer, shouldn't you be concerned about the super cap not keeping pace with inflation?

2043 is more than 6 Federal Elections time.  If it is not tweaked by then, I would be very surprised.  This is a ridiculous comment.

[chevy1956]

I'm a bit concerned about the effects of inflation.

$3M might seem to go a long way in 2023, but will it go as far in 2043?

According to a good number of economists, the Western world can expect elevated inflation over coming decades.

Assuming your time horizon is 20 years or longer, shouldn't you be concerned about the super cap not keeping pace with inflation?

2043 is more than 6 Federal Elections time.  If it is not tweaked by then, I would be very surprised.  This is a ridiculous comment.

I think it's a fair comment. The amount needs to be indexed to inflation or close to it.

I'm also concerned about taxing unrealized gains but I'd like more information prior to thinking this is that bad. I think some people have so much money in Super and unrealized gains of ridiculous amounts of money. It'd kill me though to tax unrealized profits. I don't think this will actually happen but it's a little concerning.

[middo]

I'm a bit concerned about the effects of inflation.

$3M might seem to go a long way in 2023, but will it go as far in 2043?

According to a good number of economists, the Western world can expect elevated inflation over coming decades.

Assuming your time horizon is 20 years or longer, shouldn't you be concerned about the super cap not keeping pace with inflation?

2043 is more than 6 Federal Elections time.  If it is not tweaked by then, I would be very surprised.  This is a ridiculous comment.

I think it's a fair comment. The amount needs to be indexed to inflation or close to it.

I'm also concerned about taxing unrealized gains but I'd like more information prior to thinking this is that bad. I think some people have so much money in Super and unrealized gains of ridiculous amounts of money. It'd kill me though to tax unrealized profits. I don't think this will actually happen but it's a little concerning.

Income tax rates are not indexed.  There is no reason to index this.

And without being too rude, if you have more than 3 million in super, why should you continue to get a tax concession.  If you can't find the cash for the tax bill on unrealised asset growth, sell a few of those assets.  You have a couple of years notice.

[chevy1956]

Income tax rates are not indexed.  There is no reason to index this.

Let me re-phrase my point here. I think at some point they will have to increase that 3 million dollar limit to a higher amount.

And without being too rude, if you have more than 3 million in super, why should you continue to get a tax concession.  If you can't find the cash for the tax bill on unrealised asset growth, sell a few of those assets.  You have a couple of years notice.

I basically agree with you apart from the unrealized asset growth. Just say that you pay the unrealized taxes in a stock market boom and then the market crashes. That could hurt a lot.

I do agree though with some form of increased taxation. My in-laws have 50+ million. I assume I'll inherit a lot of money. It's wrong. It just keeps getting handed down. My cousins are exceptionally wealthy as well. It's elite level privilege and it doesn't sit well with me. They went to uni but their parents buy them a unit close to uni. Some of my family are also poor Muslims. The difference between the poor Muslims living in Lakemba compared to the wealthy family living in the Eastern Suburbs is crazy.

[Fresh Bread]

@chevy1956 This is knowingly veering off topic but maybe your spouse can encourage the in-laws to give a good chunk of money away now. It could do some real good in the world. I can imagine their house being 10-15m of it if they are Eastern Suburbs but still, with the rest of it, they could probably fund the cure to some disease with that sort of money and have a real legacy. That's crazy rich.

[deborah]

It's really interesting that the new, extra 15% tax if you're over $3million counts earnings and unrealised earnings and is separate to the existing 15% tax, which is on earnings and capital gains. They are two separate taxes.

With the current scheme, you can separate your super investments between retirement phase investments and accumulation phase investments. For instance, you can put mining shares (with low dividends) into accumulation phase, and bank shares (with high dividends) into retirement phase. This allows your superannuation to pay less tax because only investments in accumulation phase pay the existing 15% tax.

However, the unrealised value of all investments in both phases count toward the over $3million new 15% tax, pro rata.

[chevy1956]

@chevy1956 This is knowingly veering off topic but maybe your spouse can encourage the in-laws to give a good chunk of money away now. It could do some real good in the world. I can imagine their house being 10-15m of it if they are Eastern Suburbs but still, with the rest of it, they could probably fund the cure to some disease with that sort of money and have a real legacy. That's crazy rich.

To be fair to them they do give money to charity right now. In the context of this thread they also have a tonne of unrealized gains. They bought their no 1 house in the Eastern Suburbs for 1 million dollars. They hate selling their property and that is where the vast majority of their wealth is stored.

I've already spoken to my wife and suggested that she (maybe we) give most of the inheritance to charity,

[chevy1956]

However, the unrealised value of all investments in both phases count toward the over $3million new 15% tax, pro rata.

This will kill some people.

[deborah]

However, the unrealised value of all investments in both phases count toward the over $3million new 15% tax, pro rata.

This will kill some people.

I can see people getting extra high valuations for their houses and artwork and other assets in super that don’t have a known market value in 2024 to use as the baseline for this new tax, so they have an unrealised loss to carry over for a number of years.

[chevy1956]

However, the unrealised value of all investments in both phases count toward the over $3million new 15% tax, pro rata.

This will kill some people.

I can see people getting extra high valuations for their houses and artwork and other assets in super that don’t have a known market value in 2024 to use as the baseline for this new tax, so they have an unrealised loss to carry over for a number of years.

I'm laughing at this. I'm so against scamming taxes. It adds nothing to the economy. People will always look for their little scams though.

[marty998]

However, the unrealised value of all investments in both phases count toward the over $3million new 15% tax, pro rata.

This will kill some people.

I can see people getting extra high valuations for their houses and artwork and other assets in super that don’t have a known market value in 2024 to use as the baseline for this new tax, so they have an unrealised loss to carry over for a number of years.

I'm laughing at this. I'm so against scamming taxes. It adds nothing to the economy. People will always look for their little scams though.

What a thread to come back to. I guess I've been enjoying my little hiatus away from these boards.

The taxing of unrealised gains is a concept that actually already exists in tax law. It's called TOFA - taxation of financial arrangements, and it's really not as complicated as everyone from the screaming press to the people here above are claiming. It's been around for 20 years in the financial services industry.

I can't see it being legislated however. This will die in the Senate like all half baked ideas.

You're all smart people. After all these years I can't believe I still see people moaning about things that are either (a) never going to happen or (b) don't affect you or (c) might affect you but will barely be noticed because you've taken the concepts from this blog (remember MMM?) and applied it to build in some resilience into your lives.

Get a grip. Robodebt killed people. People who had nothing and lived hand to mouth on newstart who were given debt notices of $20,000+ when they earned a few dollars over the threshold for a few weeks and the government assumed they earned that for the year.

Taxing people 15% on earnings who have $3m in super ($6m as a couple), and who would generally have at least another $3m+ of assets outside of super is not going to kill anyone. Seriously FFS.

[Model96]

Governments have been messing with the tax treatment on superannuation since the moment it was created. Who on earth expects those rules to stay the same for more than about five minutes? That's just part of the risk associated with investing in super. Remember risk, that thing that's supposed to correlate with reward?

John Howard, back in 1996, probably made the biggest changes which affect everyone, by changing the pension age and preservation rules.
This current crop of new rules will only affect those who are using the low tax environment for something it wasn't designed for..