Is your super safe? Labor’s new tax could be just the beginning— by Noel Whittaker
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Noel Whittaker is the author of Wills, Death & Taxes Made Simple and numerous other books on personal finance. Email: [email protected]
Labor’s proposed tax on unrealised capital gains in super is finally getting the attention it deserves, as more Australians grasp just how draconian the policy really is.
It’s a textbook example of unintended consequences – a slick-sounding policy with the potential to wreak financial havoc. It must have been an irresistible proposition: let’s put a special tax on the rich; there aren’t many of them, and they don’t vote for us anyway.
Welcome to Australia’s Animal Farm, where all super funds are equal, but some are more equal than others. Judges and public servants retiring on massive defined benefit pensions, often worth well over $3 million, have been handed a special exemption.
Why? Because taxing them was deemed ‘too hard’, while everyone else above the cap is expected to pay up.
Labor’s proposed tax on unrealised capital gains in superannuation is facing backlash for being unfair and selectively applied. Image source: Seniors Discount Club
The hypocrisy is breathtaking. The proposed tax is also a form of double taxation. Under this plan, you’ll pay an extra 15% tax each year on the nominal increase in value of your super assets — even if you haven’t sold anything. When you do sell those assets and realise a profit, you’ll pay capital gains tax. And no, there’s no credit for tax already paid on the unrealised gains.
Labor has never made any secret about their hatred of self-managed super funds. Every dollar in an SMSF is one less dollar paying fees to the Labor-dominated industry super funds. But SMSFs let people hold assets not open to the big funds – business premises, farms, and commercial property, none of which can be sold at the click of a button. If taxes on paper profits force enough people to liquidate at once, prices will collapse; it’s simple supply and demand.
And make no mistake – Australians will respond. Many I’ve spoken to are already planning to restructure by gifting to children: helping them buy property, pay down loans, or invest. That shift, combined with likely interest rate cuts later this year, could fuel another property boom. It’s the opposite of what the government claims it’s trying to achieve.
If this tax becomes law, it will also impede innovation. Many tech founders launch start-ups through their super funds, and these businesses are often illiquid for years. Their perceived value can fluctuate wildly. Imagine a $1 million start-up growing to $6 million on paper, triggering a tax on a $5 million gain that may never be realised. If the valuation crashes to $3 million the next year, the fund is still taxed on money that never existed. Madness.
And let’s not forget the Laffer Curve: the well-established principle that raising tax rates beyond a certain point actually reduces total tax revenue. Push people hard enough, and they’ll restructure, withdraw, or move their wealth offshore. So a tax designed to raise more money might end up collecting less.
But the biggest danger is this: it’s a foot in the door for taxing wealth that doesn’t exist. Once you accept that principle, no asset is safe.
A proposed tax on unrealised superannuation gains is unfair, economically damaging, and sets a dangerous precedent for taxing unrealised wealth. Image source: Seniors Discount Club
If it’s okay to tax unrealised gains for someone with $3 million in super – or $2 million if the Greens get their way – what stops a future government from applying the same logic to investment properties? Or a share portfolio? Or a business?
And then there’s the family home. Right now, your principal residence is tax-free, even if it’s worth $100 million. But it stands out like a beacon for any government desperate for cash and bold enough to grab it.
Once that line is crossed, there’s no telling where it ends. You may think this policy doesn’t affect you, but to quote John Donne: ‘Never send to know for whom the bell tolls; it tolls for thee.’
About the author: Noel Whittaker, AM, is the author of Wills, death & taxes made simple and
Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. Always seek professional advice that takes into account your personal circumstances before making any financial decisions. The views expressed in this publication are those of the author.
