Leading financial commentators have labelled Labor’s controversial plan to impose hefty taxes on unrealised capital gains as a “wealth tax” and outlined the potential dangers if the government applied the move to a range of commonplace assets.
The Albanese government’s polarising plan to slap a 30 per cent tax rate on super funds above $3 million looms, with Labor and the Greens expected to join forces in the Senate to pass the legislation after the Prime Minister’s resounding election victory.
However, the policy has faced relentless backlash from industry magnates who have slammed Labor for overturning decades of convention by charging taxes on gains before they are realised and for refusing to index the policy.
Prominent financial commentator Dimitri Burshtein labelled the policy a “wealth tax” and told Sky News host Chris Kenny that despite Labor claiming the proposal would only impact a slim portion of the population, the non-indexation of the policy meant that more people over time would fall victim to the tax.
“It's currently non-indexed, so eventually it could erode to ridiculously low levels and capture everyone,” Mr Burshtein said, adding there was an element of “sloppiness in the analysis” due to Treasury not counting all defined benefit superannuation schemes.
The corporate consultant also denounced Deputy Prime Minister Richard Marles’ accusation the business sector's opposition to the plan was akin to a “scare campaign” and reiterated the proposal violated longstanding norms of the Australian taxation system.
“It's a horrible tax. It's designed badly, it breaches transparency. The fact that it can be charged on unrealised gains is just despicable. It lays a template to go after the home, any assets, it's essentially a wealth tax,” Mr Burshtein said.
Meanwhile, Sky News Australia Business Editor Ross Greenwood said the tax on unrealised capital gains in super balances was unprecedented in nature and represented a seismic shift in how the government collected revenue.
“I heard Richard Marles said this was a scare campaign, well of course it's a scare campaign because this basically undoes the basic principles of Australia's tax system,” he said.
"It's not indexed, so more and more people each and every day because their earnings will rise will drop into this pool of people, they will actually be taxed when and if every year the price of their assets has gone up”.
Mr Greenwood also said the policy deterred people from accumulating sufficient funds in their superannuation accounts and forced account holders to switch from self-managed funds to industry funds of which are subject to more stringent government regulation and oversight.
“In many ways it almost seems though this tax strategy is a strategy to try and stop people accumulating too much in their super funds and secondly to try to divert people with self-managed super funds to put their money into industry funds”.
“Of course, industry funds is where you've got many unions that have more control over that and as a result the government has more control over where that money is allocated as well."
He also explained the proposal would have dire consequences on liquidity and stated that although an asset may rise exponentially in price in a given year, an account holder likely would not possess the available capital to pay the tax bill unless they sold the asset itself.
“If they invest in a piece of venture capital that rises very rapidly in price, they could be given tax bill that they can’t pay, and at the same time they can't sell the business because the business is not for sale, it's not traded on the public market," Mr Greenwood said.
The seasoned business reporter stressed that even if a consumer paid a tax on an unrealised capital gain one year, if the asset fell in value the next year the government would not provide the superannuant with a rebate or a refund on the loss.
“So all of a sudden your asset can go up and come back down, you've paid the tax but the tax officer and the government don't give you any money back. You have to sell the asset to be able to get a tax credit based on capital gains tax," he said.
The Albanese government’s polarising plan to slap a 30 per cent tax rate on super funds above $3 million looms, with Labor and the Greens expected to join forces in the Senate to pass the legislation after the Prime Minister’s resounding election victory.
However, the policy has faced relentless backlash from industry magnates who have slammed Labor for overturning decades of convention by charging taxes on gains before they are realised and for refusing to index the policy.
Prominent financial commentator Dimitri Burshtein labelled the policy a “wealth tax” and told Sky News host Chris Kenny that despite Labor claiming the proposal would only impact a slim portion of the population, the non-indexation of the policy meant that more people over time would fall victim to the tax.
“It's currently non-indexed, so eventually it could erode to ridiculously low levels and capture everyone,” Mr Burshtein said, adding there was an element of “sloppiness in the analysis” due to Treasury not counting all defined benefit superannuation schemes.
The corporate consultant also denounced Deputy Prime Minister Richard Marles’ accusation the business sector's opposition to the plan was akin to a “scare campaign” and reiterated the proposal violated longstanding norms of the Australian taxation system.
“It's a horrible tax. It's designed badly, it breaches transparency. The fact that it can be charged on unrealised gains is just despicable. It lays a template to go after the home, any assets, it's essentially a wealth tax,” Mr Burshtein said.
Meanwhile, Sky News Australia Business Editor Ross Greenwood said the tax on unrealised capital gains in super balances was unprecedented in nature and represented a seismic shift in how the government collected revenue.
“I heard Richard Marles said this was a scare campaign, well of course it's a scare campaign because this basically undoes the basic principles of Australia's tax system,” he said.
"It's not indexed, so more and more people each and every day because their earnings will rise will drop into this pool of people, they will actually be taxed when and if every year the price of their assets has gone up”.
Mr Greenwood also said the policy deterred people from accumulating sufficient funds in their superannuation accounts and forced account holders to switch from self-managed funds to industry funds of which are subject to more stringent government regulation and oversight.
“In many ways it almost seems though this tax strategy is a strategy to try and stop people accumulating too much in their super funds and secondly to try to divert people with self-managed super funds to put their money into industry funds”.
“Of course, industry funds is where you've got many unions that have more control over that and as a result the government has more control over where that money is allocated as well."
He also explained the proposal would have dire consequences on liquidity and stated that although an asset may rise exponentially in price in a given year, an account holder likely would not possess the available capital to pay the tax bill unless they sold the asset itself.
“If they invest in a piece of venture capital that rises very rapidly in price, they could be given tax bill that they can’t pay, and at the same time they can't sell the business because the business is not for sale, it's not traded on the public market," Mr Greenwood said.
The seasoned business reporter stressed that even if a consumer paid a tax on an unrealised capital gain one year, if the asset fell in value the next year the government would not provide the superannuant with a rebate or a refund on the loss.
“So all of a sudden your asset can go up and come back down, you've paid the tax but the tax officer and the government don't give you any money back. You have to sell the asset to be able to get a tax credit based on capital gains tax," he said.
