Courtesy of The Australian
22.05.2025
The latest warnings have come from former Reserve Bank of Australia governor Philip Lowe and former Treasury secretary Ken Henry. Their message to Jim Chalmers is that taxing unrealised capital gains is not good policy and should be scrapped. They suggest alternative revenue measures that would have less potential for unintended consequences. One suggestion, included in the Henry Review, was to make concessional tax rates on super contributions more equitable between richer and poorer superannuants without taxing unrealised gains.
The federal government’s plans as they stand have been opposed by industry superannuation funds, self-managed funds, investors, business leaders and even former trade unionists.
It all smacks of a government desperate to raise revenue to feed an unsustainable federal budget. One fear is that once introduced, the new tax is difficult to repeal and can easily be extended beyond what was promised. This is a reasonable concern given that those rich enough to be liable are likely to be clever enough to find ways to avoid the tax by selling down assets or moving them offshore. This will reduce the amount the government claims it will collect.
Another danger is that bracket creep will ensure the tax net progressively snares a bigger percentage of investors. In all, it acts as a disincentive for young people today to save through superannuation for their retirement and old age.
The perils of the new tax proposal are not confined to the retirement funds of the super wealthy, however. It will have a direct impact on small-business owners and farmers who have put illiquid property assets into their superannuation funds and who may be forced to sell them to pay the taxman. It is also a problem for entrepreneurial start-ups who need patient capital to make new inventions and solve problems in a way that is of community benefit.
As Matthew Cranston reports on Friday, the new tax will work against the government’s priority aims, including meeting its overly ambitions climate change mitigation targets. Renewable energy infrastructure pioneer Hasting Funds Management and Mike Fitzpatrick, director of Pacific Hydro and Global Renewables, have sounded a warning about what it might mean for research and investment across a suite of areas including wind farms, electric transportation, sustainable agriculture, hydro-electric plants, geothermal plants, urban rubbish recycling, ethanol, biodiesel, wave energy and high-quality silicon manufacture.
In essence, the plan to tax unrealised profits is a direct attack on something Labor used to understand; that is that to build society it is necessary to grow the economic pie before it can be cut up and spread around as government largesse.
The threat of misguided tax policy is cultural as well as financial. It risks destroying the Australian ethic of giving it a go. The incentive increasingly will become to take a government job, work from home, and relax. It is a recipe for permanently lower living standards, and for our best and brightest minds to work offshore. Left unchecked, this is a trend that will be difficult to unwind.
At the core of the Albanese government’s industry and economic policies is a belief that government knows best. It is a recipe for big government that ranges from picking winners through the Future Made in Australia policy to onerous industrial relations laws that make it difficult for small business to operate. It also explains why the federal government is deaf to the warnings that are now coming thick and fast on its foolish plans to tax unrealised capital gains in high-balance superannuation funds.