Who knows what to believe

From the Editor: Darin Tyson-Chan

Inaugural SMSF Association Trade Media Journalist of the Year

Just when we thought the proposed Division 296 tax was just about dead and buried, it’s back larger than life after the federal election result that materialised on 3 May. And what probably caught everybody by surprise was the result in the upper house, which now means the returned Labor government only needs the support of the Greens to get the bill to bring the new tax in passed.

And this is concerning considering the Greens are continuing to push for the threshold of the impost to be lowered to $2 million, albeit they are in favour of including an indexation lever should this demand be met.

So basically your guess is as good as mine as to how this will all play out. Treasurer Jim Chalmers has been resolute, saying the government has not changed its position with regard to the policy, meaning the implementation of a $3 million threshold with no indexation applied to it and a tax calculated on unrealised capital gains. But can we really believe this? This is exactly the same message that emanated from Prime Minister Anthony Albanese in his government’s first term about the Stage 3 tax cuts and we all know when they were finally implemented there were significant changes made to the measure.

Also, other statements the Treasurer has made about the proposal can only be considered as bald-faced lies and he has been called out by many industry bodies on them. The most staggering one being that no alternative calculation methods for the tax were put forward during the consultation period.

To this end, as far back as July last year the SMSF Association proposed using the 90-day bank bill rate as a proxy for actual taxable earnings in the measure instead of the method in the bill whereby a person’s opening total super balance in a particular financial year is subtracted from their closing balance with a few adjustments, incorporating the taxing of unrealised capital gains.

Adding to my scepticism with regard to what the end result will be is Chalmers’ seeming lack of understanding of how the tax works. When announcing the deferral measure that would apply to members, such as the Prime Minister, in defined benefit arrangements, the Treasurer said this allowance was made because it would not be fair to make a person in this situation pay a liability before they were able to access their superannuation money.

The fact is the Division 296 tax is one that is levied on the individual. It means the person who has to pay this tax can either pay it personally or via their super fund. As such, there would be nothing stopping an individual in a defined benefit fund paying it from their own pocket. This detail basically means there is no need to introduce the ability to defer the payment of this tax for one particular cohort. Doesn’t Chalmers know this?

None of the points above give me any confidence this policy will be amended for the better and in fact we could see changes based on political grounds making it even worse. Your guess is as good as mine how it will work out in the end, but my glass is definitely half empty.