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Flaws in Labor’s plan and resistance from crossbench MPs could prevent the Division 296 tax bill from ever becoming law, experts have said.
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$3m super tax cast into limbo as parliamentary support crumbles
27 November 2024
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A contentious plan to hike tax on super accounts over $3 million has been thrown into limbo with the Labor government failing to secure crossbench support to pass the measure during Parliament’s last sitting session.
Industry experts welcomed news of the bill being left out of the government’s list of priority legislation this week, as reported by The Australian Financial Review, and speculated it could mean the tax might never become law.
SMSF Association chief executive Peter Burgess said Labor was running out of time and options to pass the tax with crossbench MPs remaining “very concerned” about “many aspects”.
Although the government could still ram the bill through using a “guillotine motion” to limit debate, Burgess, who has been lobbying against the proposal in Canberra this week, said such a move now would be “extremely unlikely.”
“Including this bill in a guillotine motion would require the support of the Senate,” he said.
“We now know, with a fair degree of certainty, that this measure will not be passed in the current sitting of Parliament meaning the earliest it could be passed would be February next year when the Senate sits again.”
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It comes despite Labor ministers signalling they had not given up hope on passing the bill by the end of the week.
Finance Minister Katy Gallagher told reporters on Tuesday that she was “not giving up until the close of bells on whenever we finish this week on getting all of our legislation through”.
“We’re in negotiations to get as much of that through as we can, but [the super tax] certainly remains Labor policy,” she said.
Burgess said that even if the measure was passed in February, it could result in a deferred start date for the tax.
“The proposed 1 July 2025 start date would not give a sufficient amount of time for impacted members to consider their options and take action – something that the government has been concerned about ever since this measure was first announced,” he said.
Nicholas Ali, head of SMSF technical services at Neo Super, welcomed news of the delay and slammed the proposal to increase the tax rate from 15 per cent to 30 per cent on super balances exceeding $3 million as “lazy policymaking”.
“Riddled with flaws and unpopular across the board, the proposal taxes unrealised gains to accommodate industry funds’ outdated systems, unfairly penalising SMSFs that can calculate realised gains with ease,” Ali said.
An election in the early months of 2025 could also mean “there’s a real chance the tax may never become law”.
“Even if it is delayed into the new year, an early election looms,” Ali said.
“A future government could pursue fairer, more equitable superannuation reforms – ones that don’t appear to pander to those donating to the government of the day.”
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