Minister admits super tax changes may drive family farm sales
Minister for Agriculture and Small Business Julie Collins has admitted that if the proposed $3 million super legislation is passed, farmers may need to sell their family farms.
During question time in Parliament on Monday, Collins said if the tax on unrealised gains is legislated as part of the Better Targeted Superannuation Bill, even in years with zero or negative income, farmers would have to find the cash to meet liquidity requirements, potentially forcing the sale of family farms.
National Farmers’ Federation deputy CEO, Charlie Thomas, said the comments underscored the sector’s concerns about taxing unrealised gains.
“The farm sector has consistently flagged that this bill will leave farmers in a terrible situation where they may have to sell their assets out from under the next generation,” Thomas said.
“What the minister explained in question time is that this may happen sooner than we think – with self-managed funds needing to hold liquid assets to meet theoretical future tax liabilities. That means farmers might be faced with the choice: sell now, or breach liquidity requirements.”
Thomas added the idea of taxing farmers for fluctuations in the property market is an absurd precedent that has no place in Australia’s tax system.
Council of Small Business Organisations Australia CEO, Luke Achterstraat, said the same issues apply to small and family business owners.
“What we saw by the Minister for Small Business sends an alarming signal not just to farming families but to Australian small business owners,” Thomas said.
“This new tax on the unrealised gains on assets held in the SMSF may see an increased obligation that represents a significant proportion of an owner’s annual income, or even exceed it.”
He continued the proposed tax will see farmers left in a “terrible situation” where they may have to sell their assets to meet the new tax obligation or increase lease rates to their children so much that their own children’s business may become unviable.
“The government has consistently said this bill targets the top end of town, people with hundreds of millions of dollars in their super accounts – not hard-working, family-run small businesses. What we saw from the minister shows that is simply not true,” Thomas said.
Thomas said SMSFs are a common tool in small businesses to manage assets and business succession.
“In the case of agriculture, older farmers will often hold their assets in an SMSF and lease the operations to their children, providing both retirement income for them as well as an opportunity for the next generation to start farming,” he said.
“In evidence provided to the Senate economics committee inquiry into the bill by the SMSF Association, it was estimated that over SMSF 17,000 accounts in 2021-22 held farming land.
“More than 3,500 of those will be immediately impacted by the new tax, and substantially more are likely to be captured in the coming years. Additionally, it was estimated that there are 13,000 SMSFs holding business real property who will be impacted by this tax.”
