Scrap $3m super cap, say associations

Two leading associations have called for the government’s plan for a tax on super balances above $3 million to be scrapped, as the legislation is tabled in Parliament.

The Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 regarding the $3 million super cap was tabled in Parliament on 30 November. 

But the Chartered Accountants Australia & New Zealand (CA ANZ) and SMSF Association are fighting back against its introduction as they feel it will unfairly hit younger people in the future.

CA ANZ calculates, for example, that a 25-year-old young professional today earning $95,000 per year, about the average full-time wage, will be $90,000 worse off in retirement under the proposed changes.

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Earlier this week, the Association of Superannuation Funds of Australia (ASFA) stated that around 80,000 people will be affected from 2025, the time of its implementation.

“It is simply not fair to shift the goal posts yet again on superannuation,” said CA ANZ superannuation and financial services leader, Tony Negline. 

“These changes will unfairly impact on people who are in or approaching retirement who followed the rules, and are also a tax trap for young players. We are urging Parliamentarians to either pause, reject or amend this legislation – because it would be unjust to pass the bill in its current version.

“It is our duty to make sure that amendments to legislation are fair and balanced – and today’s amendments deeply concern us.”

Peter Burgess, chief executive of the SMSF Association, said: “Taxing unrealised capital gains is a tax on market movements and changes in asset values, not income – an alarming precedent as it represents a fundamental change in how tax policy is implemented in Australia.

“As the legislation is currently drafted, a person with a high superannuation balance, whose interest has received taxable income in a year, will not be subject to this tax if their Total Superannuation Balance (TSB) movement does not trigger this tax.

“Conversely, a person who has a one-off spike in asset values, putting them over the threshold, will be subject to this tax, with no tax refund or adjustment available where the value causes them to be below the threshold the following year.

“The tax now being proposed will simply add further complexity and red tape to a superannuation system overburdened already with regulation.”