Farmers and SMEs call for protection against ‘super tax’
Farmers and small business owners have joined forces to warn the government of the adverse impacts the proposed superannuation changes will have on Australian farms and small businesses.
The National Farmers’ Federation (NFF) and the Council of Small Business Organisations Australia (COSBOA) are urging parliament to make changes to the proposed superannuation legislation.
The peak bodies are rejecting the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023.
The bill proposes an “imposed tax rate of 15 per cent for superannuation earnings corresponding to the percentage of an individual’s superannuation balance that exceeds $3 million for an income year.”
The NFF and COSBOA believe the legislation will negatively impact SMSFs.
“Self-managed superannuation funds are a common tool in small businesses to manage assets and business succession,” NFF said.
“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.”
During an inquiry into the bill, the SMSF association provided the estimation to the Senate Economics Committee that over 17,000 SMSF accounts in 2021–2022 held farming.
The SMSF Association said the new tax will immediately impact 3,500 of those and more in the coming years if the government does not apply indexation to the base threshold.
When accounting for those SMFs with assets used for other small businesses beyond farming, the number of people impacted will increase further.
The NFF president David Jochinke said the bill could still achieve its intended purpose and not harm small businesses if appropriate changes are made.
“Farmers and small business owners are united in our view that this Bill will have unintended consequences on the operations and succession planning of these small businesses across the country, in particular for those that hold an SMSF to structure their business,” he said.
“In the case of agriculture and small business, older farmers or business owners 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 enter the business.”
The NFF and COSBOA said they are concerned about the proposed taxation of “unrealised gains” on holdings proposed in the bill.
The increased tax obligation will likely place undue financial burden on thousands of small businesses, COSBOA noted.
COSBOA CEO Luke Achterstraat said the proposed tax changes will have a “detrimental impact” on small business owners across the country.
“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,” he said.
“This may see the older generation left in a terrible situation where they may have to sell their assets to meet this new tax obligation or increase lease rates to their children so much that their own children’s business may become unviable.”
The peak bodies said they are not the first to bring these issues to light.
Groups providing financial services and advice to small businesses and farming families such as The Tax Institute, The Financial Advice Association of Australia and The Institute of Financial Professionals Australia have also expressed concern.
The NFF and COSBOA said they are calling on the government to consider the tax concerns and make required amendments to protect Australian farming and small business families.
“We urge parliamentarians to consider the real-world impact of these tax changes,” Achterstraat said.
“Our small business owners deserve policies that support, not hinder their hard work and contributions to the economy.”
