Nicholas Ali

The fate of the controversial Division 296 Bill, which imposes an additional 15 per cent tax on the earnings of superannuation balances exceeding $3 million, is now with the Senate after the House of Representatives passed the legislation yesterday.

Neo Super Director of SMSF Technical Services Nicholas Ali says this is bad policy in many respects, citing the taxing of unrealised capital gains (especially for farms and small businesses), the refusal to index the cap, its potential impact on venture capital or for addressing an issue that’s been resolved – large SMSF balances – by the introduction of caps in 2016.

“But the unprecedented tax on unrealised capital gains heads the list.

“This sets an alarming precedent in Australia’s taxation policy. This legislation could have far-reaching consequences, not just for the superannuation sector but for other tax policies more broadly. It’s critical that SMSF trustees fully understand the implications as the bill heads to the Senate.”

Amendments proposed by MPs Kylea Tink and Luke Howarth—such as indexing the $3 million cap and replacing the taxation of unrealised gains with an earnings-based tax—were defeated.

The Albanese Government’s majority in the lower house ensured its passage, but its fate in the Senate is far more problematic, with some crossbenchers (as well as the Coalition) having expressed their opposition.

The Government has reiterated that less than 0.5% of fund members, or about 80,000 Australians, would be affected by the new tax. But the refusal to entertain its indexation means that number will quickly grow.

The post Division 296 Bill bad policy – especially taxing unrealised capital gains appeared first on AdviserVoice.