WEBVTT - The not-so-super tax change that is dividing Australia 0:00:04.840 --> 0:00:06.960 The Australian Financial Review. 0:00:07.560 --> 0:00:15.040 The government's super tax change has been hugely divisive. Jim 0:00:15.120 --> 0:00:20.320 Chalmers insists it's prudent policy that affects only the richest Australians. 0:00:20.720 --> 0:00:24.439 This is a change which is modest and it makes 0:00:24.480 --> 0:00:27.000 a meaningful difference to the budget. 0:00:27.440 --> 0:00:32.360 Opponents say it's confusing, unfair and will eventually capture those 0:00:32.479 --> 0:00:36.200 in their early twenties just starting out in the workforce. Today, 0:00:37.560 --> 0:00:41.879 after a resounding election victory, Labor together with the Greens, 0:00:42.240 --> 0:00:45.400 has the numbers to get the change through Parliament and 0:00:45.440 --> 0:00:51.240 those Australians with large superbalances are already preparing. But ahead 0:00:51.240 --> 0:00:55.120 of the vote, critics are becoming louder, warning there may 0:00:55.160 --> 0:00:57.520 be more taxes on wealth to come. 0:00:57.960 --> 0:01:00.440 The reality is that we do have a problem in 0:01:00.440 --> 0:01:04.080 our tax system. There is an overreliance on income taxes 0:01:04.280 --> 0:01:08.160 and young people pay very great proportion of the taxes 0:01:08.480 --> 0:01:10.320 and that problem is going to get more acute. 0:01:10.640 --> 0:01:14.880 Welcome to the Finn. I'm Lisa Murray. Today, Wealth editor 0:01:15.040 --> 0:01:19.399 jo Animes and reporter Michelle bows on how the new 0:01:19.440 --> 0:01:23.640 tax will work, why it's so controversial, and what people 0:01:23.720 --> 0:01:31.160 are doing to get ready for it. It's Thursday, June five, 0:01:38.360 --> 0:01:41.399 Hi Joe, Hi Michelle, thanks for coming on the podcast. 0:01:41.920 --> 0:01:44.080 Hi there, thanks for having us Joe. 0:01:44.120 --> 0:01:47.880 This super tax change was proposed just over two years ago, 0:01:47.960 --> 0:01:51.240 back in early twenty twenty three. At the time, Jim 0:01:51.320 --> 0:01:54.600 Chalmers and Anthony Albanizi said it would make the superannuation 0:01:54.760 --> 0:01:58.120 system more equitable, and they made a point of noting 0:01:58.160 --> 0:02:02.440 that seventeen people had superbalances worth more than one hundred 0:02:02.440 --> 0:02:05.360 million dollars. How did they pitch land. 0:02:05.440 --> 0:02:09.919 The language was really direct and incendjury. They challenged mister 0:02:10.000 --> 0:02:12.880 Dutton to take to the next election opposition to this 0:02:12.960 --> 0:02:15.320 policy and sort of in which case he would be 0:02:15.320 --> 0:02:18.680 standing on the side of millionaires. So in late February 0:02:18.680 --> 0:02:22.600 twenty twenty three, Gin Chalmers and Anthony Albanezi called a 0:02:22.600 --> 0:02:29.640 press conference. They were there to commemorate a year since 0:02:29.720 --> 0:02:32.640 the devastating floods in the Northern Rivers. But then came 0:02:32.720 --> 0:02:34.480 this surprise announcement. 0:02:35.560 --> 0:02:40.000 The Cabinet has met this morning and had a discussion 0:02:40.720 --> 0:02:41.880 about superannuation. 0:02:42.360 --> 0:02:45.320 They talked about the idea that this was really necessary 0:02:45.360 --> 0:02:48.600 because the government had inherited a trillion dollars worth of 0:02:48.600 --> 0:02:50.720 debt and you know, they had no choice but to 0:02:50.760 --> 0:02:52.639 try and find money from somewhere. 0:02:53.080 --> 0:02:57.160 And today I'm announcing the earnings on superbalances above three 0:02:57.440 --> 0:03:01.440 million dollars will have a concessional rate of thirty percent 0:03:02.120 --> 0:03:03.560 rather than fifteen percent. 0:03:03.919 --> 0:03:06.080 And straight away they made the point that it wasn't 0:03:06.120 --> 0:03:09.200 going to affect many people. They stressed that point a lot. 0:03:09.840 --> 0:03:15.160 This proposal does not changed the fundamentals of our superannuation system. 0:03:15.840 --> 0:03:21.160 Ninety nine point five percent of people with superannuation are 0:03:21.240 --> 0:03:23.600 unaffected by this reform. 0:03:24.000 --> 0:03:26.079 It was only going to be zero point five percent 0:03:26.080 --> 0:03:30.600 of zuper account holders, the wealthiest Austraians. And they made 0:03:30.600 --> 0:03:32.480 a real point of noting how some of the big 0:03:32.520 --> 0:03:35.440 account balances in the system were worth many hundreds of 0:03:35.440 --> 0:03:38.440 millions of dollars and that super had kind of gone 0:03:38.720 --> 0:03:42.440 beyond the remit of retirement savings for a dignified retirement 0:03:42.440 --> 0:03:43.880 and all this sort of language we use. 0:03:44.960 --> 0:03:48.360 And with seventeen people having over one hundred million dollars 0:03:48.600 --> 0:03:52.720 in their superannuation accounts, the individual who has over four 0:03:52.800 --> 0:03:57.080 hundred million dollars in heesel or her account, most Australians 0:03:57.080 --> 0:03:59.840 would agree that that's not what superannuation was for. 0:04:00.440 --> 0:04:03.320 Straight Away, the proposed tax change became a political issue 0:04:03.360 --> 0:04:06.400 and the Coalition said the government was leaving retirees in 0:04:06.440 --> 0:04:06.880 the cold. 0:04:07.280 --> 0:04:09.480 I think every Australians should be unsettled by what the 0:04:09.520 --> 0:04:11.760 Labor Party's doing at the moment. They went to an 0:04:11.760 --> 0:04:14.160 election and the Prime Minister promised and looked the Australian 0:04:14.160 --> 0:04:17.440 public in the eye and said that it wouldn't change superinuation. 0:04:18.000 --> 0:04:19.960 There was a month's long battle and the government was 0:04:20.040 --> 0:04:27.720 unable to get this change through the Senate. The expectation 0:04:27.880 --> 0:04:30.400 now is that with Labour's thumping victory and the Greens 0:04:30.400 --> 0:04:32.280 holding the balance of power in the Senate, that this 0:04:32.800 --> 0:04:36.159 will go through. The start date for this is July one, 0:04:36.480 --> 0:04:38.839 so there is some time to prepare for this for 0:04:38.960 --> 0:04:41.640 people who are affected, but it also gives us plenty 0:04:41.680 --> 0:04:43.960 of time to have a lot more debate and for 0:04:44.200 --> 0:04:46.680 detractors to stir discontent. 0:04:47.279 --> 0:04:50.160 So, Michelle, you've been writing a lot about this, the 0:04:50.160 --> 0:04:52.120 ins and outs of the tax, how it's going to 0:04:52.120 --> 0:04:56.360 affect people. Can you explain exactly how the change will 0:04:56.400 --> 0:04:58.640 work and who it's going to affect. 0:04:59.360 --> 0:05:02.840 Sure, Lisa, Well, it's effectively a plan to increase the 0:05:02.920 --> 0:05:06.880 tax on the earnings of superbalances above three million from 0:05:06.920 --> 0:05:10.560 fifteen percent to thirty percent. But for many people there's 0:05:10.600 --> 0:05:14.440 an actual misconception about how that will work because it's 0:05:14.480 --> 0:05:17.560 not a flat tax rate. So, for example, if your 0:05:17.560 --> 0:05:20.960 balance was three point two million, the amount above three million, 0:05:21.080 --> 0:05:24.000 is that two hundred thousand dollars and thirty percent of 0:05:24.000 --> 0:05:25.120 that would be sixty. 0:05:24.880 --> 0:05:26.320 Thousand, sixty thousand dollars. 0:05:26.400 --> 0:05:28.680 Yeah, correct, But that is not the tax that that 0:05:28.720 --> 0:05:33.120 person would pay. It's actually a proportional tax, and it 0:05:33.160 --> 0:05:36.919 only applies to the proportion of earnings above three million dollars, 0:05:37.080 --> 0:05:41.160 the proportion that that makes up of someone's total superballance. So, 0:05:41.360 --> 0:05:44.479 for example, imagine someone starts the year with a three 0:05:44.560 --> 0:05:47.720 million dollars superballance and ends it with our three point 0:05:47.720 --> 0:05:51.200 two million in super The change is that two hundred 0:05:51.279 --> 0:05:55.160 thousand dollars, But that only represents just over six percent 0:05:55.360 --> 0:05:58.800 of their total superbalance of three point two million. So 0:05:58.839 --> 0:06:01.200 the tax levied on the t two hundred thousand dollars 0:06:01.600 --> 0:06:04.400 works out to one eight hundred and seventy five dollars. 0:06:04.680 --> 0:06:07.320 So it's quite complicated, but the tax is a lot 0:06:07.400 --> 0:06:10.359 less than that thirty percent figure that we think about 0:06:10.360 --> 0:06:11.080 at the outset. 0:06:11.400 --> 0:06:12.279 Yes, that's right. 0:06:12.520 --> 0:06:15.599 And look, I think it's also worth saying here that 0:06:15.880 --> 0:06:18.800 when we've spoken to many many people about this tax 0:06:19.040 --> 0:06:22.640 that will be personally affected, it's not the idea of 0:06:22.680 --> 0:06:25.359 paying more tax on their super that they are against 0:06:25.360 --> 0:06:29.800 per se. It's the calculation of this tax, because it'll 0:06:29.839 --> 0:06:33.000 be calculated at the end of each financial year based 0:06:33.040 --> 0:06:36.120 on all those gains that they are considered to have made, 0:06:36.320 --> 0:06:39.840 whether or not they've sold assets and realized those gains. 0:06:39.920 --> 0:06:42.359 So it's effectively taxing paper profits. 0:06:42.920 --> 0:06:44.000 And that's the major. 0:06:43.760 --> 0:06:47.480 Complaint about this tax. And for example, there if one 0:06:47.560 --> 0:06:50.480 year you make a gain, you pay the tax, but 0:06:50.560 --> 0:06:53.080 then if the following year the value of your assets 0:06:53.080 --> 0:06:56.360 in super drops and you make an unrealized loss, there's 0:06:56.400 --> 0:06:57.520 no refund. 0:06:57.120 --> 0:06:59.160 For you don't get that money back, that's right. 0:06:59.560 --> 0:07:02.719 Instead, you get a credit that could potentially be used 0:07:02.839 --> 0:07:06.880 against a future game. But if you've passed away in 0:07:06.920 --> 0:07:11.160 that time or closed your superfund, the credit's lost. And 0:07:11.240 --> 0:07:13.560 in terms of who this effects, the people that seem 0:07:13.640 --> 0:07:16.760 to be most agitated about the change were farmers and 0:07:16.800 --> 0:07:20.400 small business owners because they often own their property, their 0:07:20.440 --> 0:07:23.240 farm or the business premises they operate out of. In 0:07:23.320 --> 0:07:27.520 a self managed superfund. So if a superfund owns listed shares, 0:07:27.640 --> 0:07:29.120 those are liquid assets. 0:07:29.480 --> 0:07:31.320 They're easy to sell, that's right. 0:07:31.360 --> 0:07:33.720 If they get that tax bill on the paper profits, 0:07:33.760 --> 0:07:36.480 they can sell some shares to pay the tax. But 0:07:36.720 --> 0:07:39.600 if you haven't a liquid asset, much harder to sell, 0:07:39.640 --> 0:07:42.440 like a farm or a commercial premises, and the value 0:07:42.440 --> 0:07:44.480 of that goes up and you need to pay. 0:07:44.320 --> 0:07:45.120 Tax on it. 0:07:45.120 --> 0:07:48.160 It's pretty difficult to sell a paddock of a farm 0:07:48.280 --> 0:07:51.200 or a bathroom of a property to pay that. So 0:07:51.280 --> 0:07:54.440 the government is expecting to generate two point three billion 0:07:54.520 --> 0:07:57.440 in the first full year of collection, and of course 0:07:57.480 --> 0:08:00.920 we know charmers keep saying it's only to affect eighty 0:08:00.960 --> 0:08:05.320 thousand people or zero point five percent of taxpayers at first, 0:08:05.920 --> 0:08:08.280 But then we get to the other major criticism of 0:08:08.280 --> 0:08:11.560 this plan is that the three million dollar threshold isn't indexed, 0:08:11.920 --> 0:08:15.040 and due to bracket creep, which is essentially the tax 0:08:15.120 --> 0:08:19.800 thresholds not rising with inflation and wage increases, Treasury projects 0:08:19.840 --> 0:08:22.800 that if that threshold doesn't change over thirty years, some 0:08:22.920 --> 0:08:25.960 one point two million people, or actually ten percent of 0:08:26.000 --> 0:08:31.120 taxpayers will eventually be hit, and young people particularly will 0:08:31.160 --> 0:08:34.840 be in the firing line. So AMP Deputy chief economist 0:08:34.880 --> 0:08:38.679 Diana Messina estimates that today's typical twenty two year old 0:08:38.760 --> 0:08:42.559 worker will definitely accumulate more than three million in SUPER 0:08:42.600 --> 0:08:45.280 by the time they hit sixty four. And that's only 0:08:45.320 --> 0:08:47.920 if they ever earned the average wage. That's just due 0:08:47.960 --> 0:08:50.840 to wage inflation and the power of compound interest in super. 0:08:51.360 --> 0:08:55.440 So Joe Michelle's picked up there on the two main 0:08:55.640 --> 0:09:00.679 contentious issues with this tax. One is that it's not indexed, 0:09:00.720 --> 0:09:04.400 which means the threshold for the tax that three million 0:09:04.440 --> 0:09:08.000 dollars doesn't rise in line with inflation, so it captures 0:09:08.000 --> 0:09:10.400 more and more people every year, and as Michelle said, 0:09:10.800 --> 0:09:15.120 it will eventually capture young people who've started paying souper today. 0:09:15.640 --> 0:09:19.640 And the other big criticism is that it includes unrealized gains. 0:09:19.720 --> 0:09:22.760 So where's most of the opposition coming from. 0:09:22.920 --> 0:09:26.800 Yeah, so, as Michelle said, the farmers aren't happy. It's 0:09:26.880 --> 0:09:30.320 estimated that about three thousand and five hundred farms we affected. 0:09:30.600 --> 0:09:33.240 When the government announced this measure, it did give those 0:09:33.320 --> 0:09:35.200 sort of figures about who would be affected, but it's 0:09:35.200 --> 0:09:38.480 been silent since, so there's been sort of quite a 0:09:38.480 --> 0:09:42.240 bit of speculation or modeling that's filled the void. So 0:09:42.280 --> 0:09:46.120 there's also smsfs who are obviously vocal critics. Some of 0:09:46.160 --> 0:09:49.760 them own residential property that may have appreciated significantly. They 0:09:49.840 --> 0:09:53.200 might own commercial property. They might also have invested in 0:09:53.280 --> 0:09:57.040 sort of private companies or startup businesses whereby the shares 0:09:57.080 --> 0:10:02.079 have grown significantly over time, sort of these lumpy, unlisted assets. 0:10:02.280 --> 0:10:05.280 They're the people who will be affected. Of course, the 0:10:05.320 --> 0:10:08.679 newly elected Tim Wilson and funds manager Jeff Wilson, who 0:10:08.760 --> 0:10:12.199 runs money on all retirees, have leapt in and started 0:10:12.200 --> 0:10:15.160 a campaign to sort of get rid of this proposal, 0:10:15.200 --> 0:10:17.920 as they did for the franking credits in the twenty 0:10:18.120 --> 0:10:21.920 nineteen elections, So they're going to be pretty noisy going forward. 0:10:22.440 --> 0:10:26.240 There's opposition from tax purists who argue that it's bad policy. 0:10:26.280 --> 0:10:29.440 We don't tax unrealized gains anywhere else, why should we 0:10:29.480 --> 0:10:31.800 do this here. Of course, there are others who point 0:10:31.840 --> 0:10:36.360 out that the income tax scales aren't indexed either. Paul Keating, 0:10:36.600 --> 0:10:40.360 the father of superannuation, is apparently a critic of the proposal. 0:10:40.520 --> 0:10:45.280 Or let's just say the unrealized gains and the indexation issues. 0:10:45.720 --> 0:10:48.800 And Keating is obviously a mentor to Jim Chalmers, So 0:10:48.800 --> 0:10:53.000 it'll be interesting if his criticisms have any influence on 0:10:53.040 --> 0:10:53.600 the treasurer. 0:10:54.080 --> 0:10:57.040 Yeah, Jim Chalmers will definitely be sensitive to what Paul 0:10:57.120 --> 0:10:58.000 Keating has to say. 0:10:58.720 --> 0:11:02.760 Michelle, you've been talking to financial advisors and investors about 0:11:02.800 --> 0:11:06.920 the change. How are people starting to prepare? Are they 0:11:07.000 --> 0:11:11.160 trying to get around this change before it's even been introduced? 0:11:11.840 --> 0:11:14.880 Well, as one financial adviser put it to me, he's 0:11:14.920 --> 0:11:19.079 advising clients to be alert but not alarmed. So what 0:11:19.160 --> 0:11:21.800 he was sort of alluding to there is they're definitely 0:11:21.840 --> 0:11:25.640 modeling scenarios. They're definitely looking at their options and what 0:11:25.679 --> 0:11:28.319 it might mean for their clients' tax bills. But until 0:11:28.320 --> 0:11:31.960 this law actually passes, they're not taking action just yet. 0:11:32.240 --> 0:11:34.640 If they do decide that they do need to take action, 0:11:35.280 --> 0:11:38.199 there are several strategies that we hear that people are 0:11:38.280 --> 0:11:41.040 looking at. So for some that might mean bringing forward 0:11:41.080 --> 0:11:45.200 inheritances by gifting money to kids or even grandkids. 0:11:45.000 --> 0:11:47.040 Which is a tax free that's right. 0:11:46.960 --> 0:11:49.880 And that would help them lower their superbalances below three 0:11:49.920 --> 0:11:53.960 million dollars. Or another option would be taking some money 0:11:54.000 --> 0:11:56.679 out of super and putting it into other structures they 0:11:56.720 --> 0:12:00.640 may have, like a family trust or an investment company. However, 0:12:00.640 --> 0:12:03.920 there would be a capital gains tax payable in the 0:12:03.960 --> 0:12:06.800 moving of that money, so for some people, the modeling 0:12:06.880 --> 0:12:08.920 might show that they're just better off leaving it in 0:12:09.000 --> 0:12:11.960 SUPER and paying the tax. Of course, another way to 0:12:12.000 --> 0:12:14.440 lower the balance could be to split SUPER with a spouse, 0:12:14.559 --> 0:12:17.360 if your spouse has a much lower balance than three million, 0:12:18.000 --> 0:12:20.400 so there's that option. I think the ones that are 0:12:20.440 --> 0:12:23.079 really stuck, though, are the people that are younger than 0:12:23.120 --> 0:12:25.960 sixty who haven't reached preservation age yet and they can't 0:12:26.000 --> 0:12:29.440 withdraw any money from SUPER, so they're much more limited 0:12:29.480 --> 0:12:31.880 in what they can do to adjust their balance, and 0:12:32.000 --> 0:12:35.760 their best option is probably to change the asset mix 0:12:35.800 --> 0:12:39.760 in SUPER, looking to hold more liquid, lower growth assets 0:12:39.800 --> 0:12:44.440 inside SUPER, like bonds like larger amounts of cash or 0:12:44.440 --> 0:12:47.440 even dividend paying blue chip shares that don't move too 0:12:47.520 --> 0:12:51.679 much in value, and owning those higher growth assets outside 0:12:51.679 --> 0:12:56.000 of SUPER. So that's things like property, cryptocurrency, or any 0:12:56.040 --> 0:13:00.160 speculative shares because they obviously have a bit more price volatility. 0:13:00.600 --> 0:13:03.559 Of course, there are some potentially what might be considered 0:13:03.600 --> 0:13:07.240 anyway slightly dodgy strategies that might be a focus for 0:13:07.320 --> 0:13:10.960 the ATO, such as people moving money offshore or seeking 0:13:11.120 --> 0:13:15.280 more conservative valuations for unlisted assets such as property, and 0:13:15.320 --> 0:13:18.600 the ATO is putting wealthy families on notice that it 0:13:18.600 --> 0:13:21.560 will be watching what they're doing in preparation for this 0:13:21.679 --> 0:13:30.000 tax going forward. But ultimately, Lisa, all of those scheming 0:13:30.040 --> 0:13:32.040 about what they're going to do in response to this 0:13:32.200 --> 0:13:35.400 tax might actually be missing the. 0:13:35.360 --> 0:13:36.240 Bigger picture here. 0:13:37.040 --> 0:13:41.240 Because government debt isn't getting any smaller, there's more and 0:13:41.320 --> 0:13:45.160 more speculation building that there will be other taxes introduced 0:13:45.200 --> 0:13:50.120 on wealth by this government. Historically, Australia's relied largely on 0:13:50.200 --> 0:13:53.120 income tax revenue to fund the budget, but there's a 0:13:53.120 --> 0:13:55.000 bit of a push away from that and it looks 0:13:55.080 --> 0:14:17.280 like the wealthy could be in the crosshairs. 0:14:19.640 --> 0:14:23.240 We're talking about the proposed super tax change, why there's 0:14:23.240 --> 0:14:27.720 opposition to it, and how people are preparing for it. Joe, 0:14:27.720 --> 0:14:30.680 there's speculation that this might just be the start. It 0:14:30.760 --> 0:14:34.000 could lead to other wealth taxes. What do you think 0:14:34.120 --> 0:14:36.360 the government might look at, Well. 0:14:36.200 --> 0:14:39.920 We know that Treasury's hot trot on looking at trusts, 0:14:40.280 --> 0:14:43.680 but I think you know, the problems are obvious to everybody, 0:14:44.200 --> 0:14:47.600 including the people who oppose this tax, who say people 0:14:47.640 --> 0:14:51.479 with high superannuation balances need to pay more tax. Superannuation 0:14:51.600 --> 0:14:55.320 death benefits are projected to increase from about seventeen billion 0:14:55.480 --> 0:14:58.520 in twenty nineteen to about one hundred and thirty billion 0:14:58.560 --> 0:15:01.480 by twenty fifty nine, so obviously a lot of super 0:15:01.640 --> 0:15:04.240 is being passed to the next generation rather than being 0:15:04.320 --> 0:15:10.360 spent for a retirement income. The tax system undoubtedly favors wealthier, 0:15:10.400 --> 0:15:14.840 older Australians. The system is increasingly generous to people aged 0:15:14.840 --> 0:15:17.560 over sixty five, who have an average tax rate of 0:15:17.560 --> 0:15:20.800 about seven point five percent, which is much lower than 0:15:21.080 --> 0:15:23.840 the people who are building families, trying to buy homes, 0:15:23.880 --> 0:15:27.480 building careers. So there's always speculation. You know, would the 0:15:27.520 --> 0:15:31.720 government reintroduce an inheritance tax? Australia abolish those taxes in 0:15:31.720 --> 0:15:35.280 the nineteen seventies, but we're an outlier, listen. I have 0:15:35.400 --> 0:15:38.480 no idea, but it would be a pretty brave government 0:15:38.760 --> 0:15:42.360 who introduced inheritance taxes. The thing about all this is, 0:15:42.360 --> 0:15:46.760 of course, this measure, when taken alone, is easy to pose. 0:15:47.520 --> 0:15:49.360 What a lot of the experts say is that a 0:15:49.400 --> 0:15:51.560 government needs to come to the people with a tax 0:15:51.600 --> 0:15:54.840 package that has trade offs it has winners, it has looters, 0:15:55.120 --> 0:15:57.640 but it sort of rewrites the tax system in a 0:15:57.680 --> 0:16:00.440 way that can be sold to the public other than 0:16:00.480 --> 0:16:03.680 just doing one small tax change. At the time, of course, 0:16:03.920 --> 0:16:06.400 Labor is a bit gun shy. It went to the 0:16:06.400 --> 0:16:10.440 twenty nineteen election, the unlosable election, with some pretty bold 0:16:10.480 --> 0:16:14.560 tax reform related to capital gains tax, negative gearing and 0:16:14.840 --> 0:16:17.840 franking credits. They were met with a scare campaign from 0:16:17.840 --> 0:16:19.080 the Liberals. 0:16:19.600 --> 0:16:23.240 Vote Labor and a retiree taxes on the horizon Bill. 0:16:23.280 --> 0:16:26.200 Shorten's new housing tax would take a wrecking ball to 0:16:26.240 --> 0:16:30.160 the economy. Labor's billions of dollars in higher taxes will 0:16:30.160 --> 0:16:32.560 put the squeeze on all Australians India. 0:16:33.280 --> 0:16:36.440 And as we all know, that election defeat was very bruising. 0:16:36.760 --> 0:16:38.200 They are inventing attacks. 0:16:38.680 --> 0:16:41.800 They're inventing just completely fabricating attacks. 0:16:42.080 --> 0:16:44.560 This does not exist and will not exist. 0:16:44.960 --> 0:16:47.920 So within the party they're very keen not to repeat that. 0:16:48.760 --> 0:16:54.000 And as you say, the tax treatment of superannuation is 0:16:54.160 --> 0:16:58.320 very generous, isn't fair to say it's becoming a real problem. 0:16:58.440 --> 0:17:02.040 Last week the Financial Review Rewindow column broke the news 0:17:02.120 --> 0:17:05.920 that two Wise Tech directors have more than two billion 0:17:05.960 --> 0:17:10.960 dollars combined sitting in their self managed super funds. That's 0:17:11.000 --> 0:17:13.800 a bit more than you need for a dignified retirement. 0:17:14.640 --> 0:17:17.240 Yeah, and the AFI has been putting in freedom of 0:17:17.320 --> 0:17:19.800 information request to the tax Office for a number of 0:17:19.880 --> 0:17:23.679 years now to find out what the biggest funds are worth. 0:17:24.400 --> 0:17:27.000 We know that forty two smsfs have more than one 0:17:27.080 --> 0:17:29.680 hundred million dollars in assets. And obviously this is actually 0:17:29.720 --> 0:17:31.640 one of the first times that we've actually known who 0:17:31.720 --> 0:17:35.440 these people are. These are the egregious examples that sort 0:17:35.440 --> 0:17:38.600 of get people fired up. So the rear window column 0:17:38.600 --> 0:17:41.920 revealed that Wise Tech director Charles Gibbon sold shares worth 0:17:41.920 --> 0:17:44.679 two hundred million in December last year, saying at the 0:17:44.680 --> 0:17:48.320 time that it was for personal estate planning purposes. They 0:17:48.359 --> 0:17:51.359 were sold by the trustee for the Gibbons Ubranuation Fund, 0:17:51.720 --> 0:17:54.920 trustees of which are mister Gibbon and his wife, which 0:17:54.960 --> 0:17:57.359 meant they paid something like ten percent of in capital 0:17:57.400 --> 0:17:59.960 gains tax, which is far lower than you would pay 0:18:00.080 --> 0:18:02.919 outside of super in your own name, which in their 0:18:02.960 --> 0:18:05.520 case would likely be forty five percent top marginal rate 0:18:05.560 --> 0:18:08.639 plus the MIDI care levy. Even after the sale of 0:18:08.680 --> 0:18:10.800 those shares. He still has wise Tech stock in his 0:18:11.080 --> 0:18:13.520 SMSF and it would probably be worth we think about 0:18:13.560 --> 0:18:16.480 one point seven billion dollars, and then another and then 0:18:16.640 --> 0:18:19.359 to compound sort of the situation. Another Wise Tech director, 0:18:19.400 --> 0:18:22.440 Michael greg we found had shares worth five hundred and 0:18:22.480 --> 0:18:25.840 sixty eight million. So these were the kinds of examples 0:18:25.840 --> 0:18:27.879 that really people get fired up about. 0:18:28.320 --> 0:18:32.639 I guess both directors have been with wise Tech and 0:18:32.720 --> 0:18:36.120 invested in wise Tech from early on, and that's. 0:18:35.960 --> 0:18:36.720 What people do. 0:18:36.840 --> 0:18:40.520 They have the shares in their fund before at IPOs 0:18:40.600 --> 0:18:43.160 and then you get that huge escalation. But it still 0:18:43.200 --> 0:18:47.359 is a pretty strong example of superfunds that have built 0:18:47.480 --> 0:18:49.000 up too much in assets. 0:18:49.560 --> 0:18:51.760 It is and opponents would say, well, this is a 0:18:51.760 --> 0:18:56.280 tax on aspiration people who have ostensibly worked hard and 0:18:56.520 --> 0:18:58.440 benefited from their ideas. 0:19:00.240 --> 0:19:04.280 Michelle. Parliament sits again next month. The government, together with 0:19:04.359 --> 0:19:07.600 the Greens, has the numbers to get this legislation through. 0:19:08.440 --> 0:19:11.159 Do you think it'll be passed in its current form 0:19:11.359 --> 0:19:13.679 or do you think the government might be forced to 0:19:13.720 --> 0:19:18.200 make changes, either in response to the criticism or any 0:19:18.240 --> 0:19:19.760 demands from the Greens. 0:19:20.280 --> 0:19:22.520 Well, as you say, Lee, so the Greens do hold 0:19:22.560 --> 0:19:25.200 the balance of power in the Senate, and they've argued 0:19:25.400 --> 0:19:28.000 that they'd like the threshold lowered to two million dollars, 0:19:28.080 --> 0:19:30.480 which would meet an extra sixteen thousand people would be 0:19:30.480 --> 0:19:33.399 captured in the first year of this tax. But unlike labor, 0:19:33.440 --> 0:19:36.480 the Greens are actually pushing for the threshold to be indexed, 0:19:36.600 --> 0:19:39.360 meaning it would increase each year in line with inflation. 0:19:40.119 --> 0:19:42.680 So if you were to assume an average inflation rate 0:19:42.720 --> 0:19:45.840 of say two point five percent, the Greens proposed two 0:19:45.920 --> 0:19:49.679 million dollar threshold would actually end up being less punitive 0:19:49.840 --> 0:19:52.720 than the labor on in next three million dollar threshold 0:19:52.760 --> 0:19:55.880 after around sixteen years. That means it would capture less 0:19:55.960 --> 0:19:59.920 people than what the government is currently proposing now. Jim 0:20:00.119 --> 0:20:02.840 Charmers has said recently in several interviews, there is no 0:20:02.920 --> 0:20:04.960 other way to do this tax change. 0:20:05.119 --> 0:20:08.760 These changes were announced almost two and a half years ago. Now, 0:20:09.160 --> 0:20:13.040 we did multiple rounds of consultation and we said to people, 0:20:13.200 --> 0:20:16.480 if there is a better fair way of making this calculation, 0:20:16.600 --> 0:20:17.360 tell us about it. 0:20:17.600 --> 0:20:20.080 He has noted that the government did do three rounds 0:20:20.080 --> 0:20:23.000 of consultation, although if you speak to those in the industry, 0:20:23.040 --> 0:20:25.600 they say that they were pretty short rounds of consultation. 0:20:25.960 --> 0:20:27.520 And his mind was already made up. 0:20:27.840 --> 0:20:30.679 Chalmers has said that taxing unrealized gains is just the 0:20:30.720 --> 0:20:32.920 simplest and best way to go about this. 0:20:33.560 --> 0:20:37.560 The unrealized gains calculation was recommended to us by Treasury. 0:20:38.040 --> 0:20:43.720 We provided years of opportunities for people to suggest different 0:20:43.760 --> 0:20:48.320 ways to calculate that liability, and nobody has been able 0:20:48.320 --> 0:20:49.399 to come up with one. 0:20:49.520 --> 0:20:52.520 He's also defended his decision not to index that three 0:20:52.560 --> 0:20:56.159 million dollar threshold. He says there's many instances in the 0:20:56.200 --> 0:20:59.600 tax system, and one is income tax rates where thresholders 0:20:59.640 --> 0:21:02.879 are not and from time to time the government can 0:21:02.920 --> 0:21:06.199 then take a decision to raise those thresholds. There are 0:21:06.240 --> 0:21:09.040 still a few weeks until Parliament comes back after the 0:21:09.080 --> 0:21:13.080 election and the new parliament begins, So whether Amas holds 0:21:13.119 --> 0:21:15.199 firm is probably going to depend to some extent on 0:21:15.240 --> 0:21:18.199 how much pressure he comes under and whether the Greens 0:21:18.240 --> 0:21:20.720 are willing to trade away any demands on this tax 0:21:20.720 --> 0:21:23.200 concession that they might have for sweetness when it comes 0:21:23.240 --> 0:21:24.119 to other policies. 0:21:25.240 --> 0:21:29.119 Finally, a question for both of you, tax concessions on 0:21:29.280 --> 0:21:33.040 super are generous, are they too generous? And what's the 0:21:33.080 --> 0:21:35.760 best way to improve the system. 0:21:36.320 --> 0:21:39.320 So, for my part Lisa, Yeah, I think the tax 0:21:39.359 --> 0:21:43.000 concessions on super are probably too generous, and some thirty 0:21:43.080 --> 0:21:48.440 years after compulsory super began, tax reform probably is necessary because, 0:21:48.560 --> 0:21:51.720 as we've said several times here, people hoarding hundreds of 0:21:51.720 --> 0:21:54.080 millions of dollars in their super is not what the 0:21:54.119 --> 0:21:58.920 system was intended for. But that taxing of unrealized gains 0:21:58.960 --> 0:22:04.160 really does still stick with me as somehow inherently unfair. 0:22:04.320 --> 0:22:06.920 And the bigger concern is will it set a precedent 0:22:06.960 --> 0:22:09.320 that will leak into other parts of the tax system. 0:22:09.600 --> 0:22:12.560 But for me, any starting point on the bigger debate 0:22:12.600 --> 0:22:15.600 about tax changes, we really need to think about the 0:22:15.640 --> 0:22:18.320 sort of society we want to live in, because there's 0:22:18.320 --> 0:22:22.119 no doubt that inequality, both between the generations and even 0:22:22.160 --> 0:22:25.760 within the haves and have nots in each generation has 0:22:25.840 --> 0:22:30.280 grown considerably in recent years, and unless that's addressed somehow, 0:22:30.920 --> 0:22:33.680 it does threaten to tear apart the very nature of 0:22:33.720 --> 0:22:38.000 what we consider Australian values. I think in our Australian society. 0:22:37.720 --> 0:22:40.399 We've talked about the generosity of our retirement system for 0:22:40.359 --> 0:22:43.720 a long time, and back in the tax white paper 0:22:43.760 --> 0:22:46.120 process there are a lot of submissions from a lot 0:22:46.119 --> 0:22:48.800 of people, very smart people talking about how to make 0:22:48.840 --> 0:22:52.520