Labor’s ‘sleight of hand’ tax would tear down success

In his first term, Anthony Albanese tried to increase the tax on super accounts worth $3m and more, including unrealised gains. It was rejected by the Senate but remains ALP policy. And the Greens, who potentially could hold the balance of power in a hung parliament, want the threshold lowered to $2m, a push the Prime Minister rejects. But what matters more is that the measure is wrong in principle and would be dubious in practice. Forcing investors to pay up before capital gains are realised, even if they intend holding assets for the long haul, would deter investment and hurt Australia’s sovereign risk reputation. Clime Investment Management founder John Abernethy said last week that the tax was a “Trojan horse” and “absolutely, totally outrageous”. If $3m is the suggested trigger point, he said, “then how many residences valued above $3m today and into the future, without indexing, would be caught? Remembering that residential home ownership is a key plank of retirement policy.”

CSL chairman Brian McNamee and veteran UBS deal-maker Brett Paton told economics correspondent Matthew Cranston last week that the tax would cost jobs, cause a drought in funding for new businesses and could lead to government taxing other assets such as residential property. With the latest Newspoll showing Labor remains ahead 52-48 on the two-party-preferred vote, the tax could become a reality, essentially penalising any Australian who succeeds at accumulating above average assets. This is a version of the tall poppy syndrome we do not need. Robert Gottliebsen has described the concept of taxing unrealised gains as “sleight of hand” – concealment tactics to establish one of the most vicious taxes ever conceived by an Australian government.

The tax would start off small, raising just $300m in government taxation revenue in its first year, Cranston writes. But it would suddenly grow to more than $2.4bn by its fourth year and almost $7bn a year within 10 years, the PBO estimates – kind of a superannuation bracket creep. Regardless of who would be hit first by the tax, it inevitably would affect more Australians, and their children and grandchildren whose inheritances would be severely clipped. Peter Dutton and Angus Taylor have ruled out such a measure but were slow to begin campaigning against it, unfortunately, stepping up the pressure only when business leaders began to speak up in this newspaper. For the sake of their nest eggs and the assets they will pass on to their families, Australians need to come to grips with the issue before they vote.

Labor evidently is desperate to contemplate such a tax grab. Mr Albanese has emerged as the big spender Bill Shorten was proposing to be at the 2019 election. He is pledging to deliver key spending policies Mr Shorten took to that poll, Greg Brown, reports, such as restoring the Gonski schools funding model at a cost of $16.5bn across a decade. This is despite Labor’s 2019 campaign review blaming the high level of spending for the party’s loss. Worse, most of the proposed spending is going on the nation’s credit card.

But taxing unrealised capital gains is a formula to tear down prosperity built up by those who have worked hard to make their way and to deter aspiration and enterprise on the part of those starting out. It must be opposed at every turn.