Angus Taylor (left) and Meg Heffron. Photo: Joel Roosa.

The federal opposition has brought its war on aspiration line into the wealth sector to attack the government’s reduction of tax concessions on super balances over $3 million, even as new research suggests the impact will be minimal.

Speaking at the SMSF National Conference on Thursday morning in Brisbane, shadow Treasurer Angus Taylor used his address to reiterate the Coalition’s opposition to Labor’s tax reforms in the wealth sector.

“It’s incredibly important to keep in mind what the sector embodies, what it stands for,” Taylor said.

“Aspiration and the desire to pay one’s own way. Reward for effort and a willingness to back yourself. Independence, self-relance and personal responsibility.”

The Coalition also argued Labor’s changes to the Stage 3 tax cuts, under which lower- and middle-income earners gained benefits over higher salary earners, were an attack on aspiration.

The government announced last year it would aim to reduce the concession tax rate for super balances over $3 million. Currently the flat tax rate is 15 per cent, but the government proposed taxing funds over the $3 million threshold at the level of 30 per cent.

“I don’t want to be overly political but right now it’s pretty hard to be apolitical about what we’re seeing,” Taylor said on the proposed super tax changes.

“At the election in 2022 the now-government claimed they want to end the superannuation wars. A year ago to the day we had the government reignite those wars and only in the last few months have we begun to see what that really looks like. The new tax is a shocker. A doubling of taxation of Australian retirement savings.”

Taylor said given Australians can’t opt out of the superannuation system, the trade-off must be choice.

“Choice about whether you use an industry fund or establish your own fund,” Taylor said.

[Choice] about the risk profile of your investment mix or whether you use your savings for a first home or in equities.”

Beyond the doom and gloom

In a session hosted by Heffron managing director Meg Heffron, aptly titled ‘$3m super tax – Beyond the doom and gloom’, the SMSF expert said it will take extreme circumstances to reach the threshold.

With few super balances for older Australians over seven figures, younger Australians were expected to be impacted by the reform which won’t be indexed.

After conducting modelling for how many 35-year-olds would reach $3 million in their working life, Heffron said it would be a stretch to get there.

“Let’s pick a 35-year-old and make them our gold star superannuation saver because even though they’re 35 and few 35-year-olds will be able to do this,” Heffron said.

“They’re going to maximise their concessional contributions from now all the way up until 65. An extreme assumption, I don’t know many 35-year-olds would or could do that. But let’s take that person, maximise their contributions, saving madly are they going to get to $3 million? The main variable there is investment returns.”

Heffron used an annual 7 per cent return which she described as “fairly decent”.

“Even though they’re maximising their concessional contributions and I’m allowing for the fact that inflation will take that up over time they’re still only getting to $3 million just as they hit 65,” Heffron said.

“It’s a pretty hard ask for somebody these days with the contribution limits the way they are to get there. People with much higher returns get there, but you need higher returns consistently for quite a long time.”

While Heffron noted there were still issues with taxing unrealised gains, and the association hosting the event has been quite vocal in its advocacy against Div 296 in general, Heffron said said if a young person was umming and ahhing about utilising the benefits of the super system she would tell them it still makes sense.

“I think getting to $3 million is much harder than it used to be,” Heffron said. “I don’t think we’ll have that many people who have that much money in the future.”

One comment on “Coalition decries attacks on aspiration, but super tax change impacts few”
    Martin Longden

    What is noticably absent in this excerpt of her discussion, is the real factor of intergenerational wealth transfer occuring over the next decade – forecasting 5,000,000 working people moving into Age Pension age.
    This includes the likelihood of the family home from the older to the younger generation being transferred, liquidated, and used to top up existing Super balances.
    Doing the forecasting with a reasonable RoR of 7% p.a., it doesn’t take much in CC from SGC over a 10 year period if the balance is boosted from an injection of $1m sale capital from a family home wealth transfer.
    Further, it isn’t unreasonable this is achievable from the sale value of the family home to gain $1m, given the extreme likelihood residential real estate will continue to increase in value over this same period at a rate of at least 4-5% p.a.

    There appears to be some holes in the critique offered on balance caps being out of reach to the majority of 35 yos, and therefore, an ability to carry this argument presented in the article as sustainable.

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