ASFA debunks $3m super tax farm sale fears
Fewer than 1 per cent of people with more than $3 million in their superannuation accounts derive income from a farm, new research shows, despite opponents to Labor’s plan to lift tax on high-balance accounts claiming the change will force farmers to sell off land.
One-third of people with more than $3 million in super had an investment property, and one-third of those negatively geared that asset, according to an Association of Superannuation Funds of Australia report that provides one of the most sweeping studies to date of who will be hit by the tax.
Fewer wealthy super savers run farms than some groups suggest, new data shows. Dominic Lorrimer
The government is planning to double the tax paid on earnings from balances in super accounts worth more than $3 million from 15 per cent to 30 per cent from mid-2025 as part of its crackdown on the generous tax treatment of the retirement sector.
It will tax unrealised gains as part of the policy, despite many experts claiming this would unfairly hurt farmers and small businesses holding property in their SMSFs.
Research by the SMSF Association last month suggested that more than one in 10 self-managed super funds hit by the plan did not have enough cash to pay the tax, warning this could force asset sell-downs by small business owners and farmers holding property in their SMSFs.
The National Farmers’ Federation has warned that the legislation could even influence farmers’ succession planning, although advisers privately say it is too early for this to happen in practice.
But the ASFA report suggested the vast majority of super savers with more than $3 million in super were not in this category, either not coming from farms or holding other non-business-related investment properties.
It found that just 0.5 per cent of super fund members would have more than $3 million in super by the time the reforms come into force. It based this on the latest tax office data on super fund balances, which was from June 2021. ASFA estimates that recent investment returns and further contributions would tip a further 80,000 over the $3 million threshold by July 2025.
“Not having enough superannuation in retirement is a much greater challenge than the relatively few older individuals not spending all of their superannuation during their lifetimes,” ASFA acting CEO Leeanne Turner said.
The farm income data only included properties that turned a profit, however.
Tax on wealthiest savers
ASFA also reported that about 60 per cent of those with more than $3 million in their super accounts in the latest ATO data were men, and about 85 per cent were 60 and older.
They were, unsurprisingly, also among the wealthiest Australians, with 35 per cent having annual taxable incomes of $200,000. Many were already in retirement, however, meaning about 35 per cent also had taxable incomes below $30,000 a year.
“Older Australians are more likely to have relatively high superannuation balances, both because they have had more time to accumulate a balance and because contribution caps were more accommodating in the past,” the report said.
The government’s proposed $3 million threshold is not indexed, however, meaning that more people than the 0.5 per cent predicted by ASFA will end up paying the increased tax on earnings.
The ASFA report, which analysed superannuation account balances generally, also found that the Coalition’s policy allowing fund customers to withdraw a portion of their retirement savings early during the pandemic would have “a lasting impact” on their retirement savings.
It would especially hit Millennials, it said, with the potential cost to their super balances exceeding $43,000 in today’s dollars if they were 30 when they accessed the scheme.
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