Govt refutes criticisms of Div 296 unfairness

The government has dismissed criticism about the fairness of taxing unrealised gains for high balance accounts.

Labor’s Division 296 – which reduces tax concessions for super balances over $3 million – has faced criticism for taxing unrealised gains. But Minister for Financial Services Daniel Mulino gave Nationals leader David Littleproud no leeway when Littleproud used Question Time to ask how the tax on unrealised gains would effect a farmer who is in an SMSF who had a failed season with no income.

“It is important that all super funds are designed to take account of diversification requirements and liquidity requirements,” Mulino said on Wednesday.

“That is an obligation under law for all superannuation funds. It is also important to bear in mind that if an SMSF has a farm or a business within the fund, that it should be receiving commercial arm’s length payments from that business or farm.”

Balances currently have a 15 per cent tax and the law would introduce a second threshold, an extra 15 per cent for the balance above $3 million.

Criticism over the law has centred over taxing unrealised gains as well as the lack of indexation.

While the government said only half a per cent of current super fund members would be impacted by the change, analysis of ATO data done by the Financial Services Council in March 2023 just after the original law was announced claimed over 500,000 current taxpayers would be adversely impacted by the tax in the future.

Mulino said the proposed concession change is a modest measure, noting it’s been debated for the past two years ad nauseum.

“I certainly won’t be taking lectures on the fairness of the superannuation system from the party that has opposed every single increase of the superannuation guarantee over the last 25 years,” Mulino said.

Mulino pointed  to the legislated objective of superannuation, which is for dignified retirements.

“This reform we are talking about is important in improving the sustainability and the fairness of the superannuation system,” Mulino said.

Treasurer Jim Chalmers reiterated around half a per cent of people in the superannuation system would be impacted.

“The expectation was there would be about half a per cent of people in the superannuation system impacted by what is a very modest change in terms of the impact of the individuals, but it would make a meaningful contribution to making the superannuation system more sustainable,” Chalmers said.

“They’ll still get very generous tax concessions in superannuation. It will be slightly less generous.”