For Australians keeping an eye on the news, many have been paying attention to the changes in some of Australia's services.

Many Aussies have also been abuzz with the government's new super tax changes.

So, what's all the fuss about, and should you be worried?

Starting Tuesday, 1 July, superannuation balances of over $3 million will have a tax increase from 15 per cent to 30 per cent.

However, this is not limited to the money made by selling assets.

The tax would also apply to unrealised capital gains, such as the increase in value of investments despite not being sold.

Aussies with a high superannuation balance may be forced to pay more taxes soon. Image Credit: Freepik

This tax rule was the first of its kind for the superannuation system.

It has also caused quite a stir among Aussies, especially seniors.

Financial advisers have observed a 'tangible sense of unease' among their clients.

As such, some wealthy retirees have already resorted to 'panic selling' their investment properties to avoid the new rules.

For those with a self-managed super fund (SMSF) and a residential property, should the property's value jump from $2.5 million to $3.5 million, they may be taxed for the $500,000 gain above the $3 million threshold.

Unlike shares, which one could sell off in small chunks to cover a tax bill, property is an all-or-nothing asset.

This change could create a real headache for SMSF trustees.

For those who do not have enough cash reserves in their fund, they may be forced to sell the entire property or find other ways to pay the tax.

And with strict rules in place about how residential properties in SMSFs can be used, the taxpayer's options are limited.

What does this mean for the property market?

Ray White's Vanessa Rader warned that these changes could make residential property a much less attractive option for investors.

If people decide to sell up before the new tax kicks in, Australians could see a surge in property listings.

This change could push property prices down for a short period.

If SMSFs start pulling out of the residential property market altogether, there could be fewer rental properties available, which might drive up rent prices.

On the flip side, some argued that the changes were targeted at a small percentage of Australians.

Yet, with property values rising across the country, more people could find themselves bumping up against that threshold soon.

What to do if you're affected by this change

Since unveiling the tax last May, it has sparked fiery debates and discussions online.

Supporters of the tax shared that it could be a fair way for the wealthiest Australians to pay their share.

However, critics argued that taxing unrealised gains could be unfair and may force people to sell assets at the wrong time.

Seniors with a self-managed super fund (SMSF) with property assets may have to sit down with a licensed financial adviser soon.

They could review portfolios, check cash reserves, and weigh in people's options and strategies fitting the new tax laws.

These advisers may also consider other investment options or restructuring holdings to avoid a tax surprise later on.

For those who have not reached the $3 million mark yet, property values could change quickly, and preparation should be the key.

Key Takeaways

• The upcoming superannuation tax change would double the tax rate on super balances above $3 million, including unrealised capital gains.
• For the first time, unrealised gains in self-managed super funds (SMSFs) will be taxed, potentially causing liquidity issues for property owners.
• SMSF trustees may be forced to sell entire residential properties or find other ways to pay the new tax, which could decrease the appeal of holding property.
• Experts warned that these changes might lead to more properties being listed for sale and could shrink the pool of rental properties.

Is this new tax a sensible move to make the system fairer, or is it an overreach that could hurt seniors and retirees? Have you been affected by the changes, or are you considering changing your investment strategy? We'd love to read your thoughts and experiences in the comments below.

 

[BruceC]

Why do people think owning property makes you rich.

Not cash rich but you are asset rich!
Many people cannot afford a property.
If you own one property you are neither cash or asset rich.
If you own multiple properties then you are asset rich

 

[Rain72]

Sorry, but we are talking $3m plus here. How many ordinary, everyday Australians have that much in their super account. How many people need $3m plus to live a comfortable retirement? Only those that were living an extravagent life before retirement, and those that are using the Super system to dodge tax. Keep in mind, your super is still earning you plenty if you have invested it wisely. What is all the fuss about?

Sorry, but it's not relevant how may people have $3 m+. What is relevant is that this type of tax is insidious and very unfair and it will have hideous flow-on effects to the whole economy, thus causing hurt to everyone. The fuss is about it being on UNREALISED gains - a tax on money you didn't get and don't have and might actually never have. The asset could go down in value next year or the year after, but you paid tax on the paper gain that never happened. That's definitely something to make a fuss about.

Think about a farm held in a super fund. The farmer has a good year. His farm increases in value by $300,000. He is taxed $100,000 - but he has no money to pay that tax because he already paid tax on his income, This tax is on the theoretical increased value of his asset. He might have to sell the farm to pay it. But let's say he can find $100,000 from savings. He pays the tax. Next year, the farm does poorly. New tariffs hit exports and he can't sell his sheep. The value of his farm drops $500,000. He has paid $100,000 tax on a profit that never happened. That's just one of thousands of possible scenarios in which this tax is shockingly unfair and harmful. And just because it hurts people who have more than you do, isn't a reason to say it's okay.

If people could shift the focus to what matters - not who will be hit by it but whether or not the tax itself is reasonable and economically sound, and every respected economist says it is definitely not. Introducing a tax on unrealised gains did massive harm to the German and Swedish economy and the change had to be quickly reversed. America listened to economists who pointed out the dangers - one of which is a massive administrative cost and headache. It also sets a very dangerous precedent. Once accepted, this type of tax could be extended to lower super balances, privately held assets, future potential income, the family home... it's terrifying to consider the possibilities.

I am strongly in favour of tax reform - but responsible reform that taxes real money, not theoretical paper money that may never actually exist. There is plenty of scope to introduce fair and responsible taxes on the real income from high balance superannuation funds. There is simply no excuse for taxing wealth that doesn't exist as real money.

 

[Rain72]

Why do people think owning property makes you rich.

You are letting envy cloud your judgement, or else you don't understand what unrealised means. It doesn't matter how asset-rich someone is, taxing them on money they don't have and might never have is wrong. By all means, tax profits. Tax income. Tax capital gain. But do not tax theoretical wealth that doesn't yet exist and might never exist. That is just fundamentally wrong, economically harmful, socially unacceptable, and sets a very dangerous precedent.
Next step - tax people on their future income. How about we legislate that wage earners have to pay tax today on the income they might earn in 2035 That would help the budget enormously. Or tax people on the increase in value on the family home. Property prices would crash as people were forced to sell to pay tax on an illiquid asset.
This tax could force farmers to sell - reducing our food supply and exports. It will send small businesses bankrupt. It will drive investment off shore, hurting our economy and making everyone poorer.
The whole concept of taxing illiquid gain is wrong. This has never been a feature of our tax system and never should be.

 

[Rain72]

I agree entirely, it's just a bit hard to feel sorry for people who have 3 million in their super funds

Then try feeling sorry for the farmers and businesses sent bankrupt, the renters whose rent skyrockets, the people who lose their jobs when investment moves overseas... This isn't as simple as some want to make it. It will have devastating effects on the economy. And it's fundamentally wrong. Tax income by all means. Tax real gains. But this is a tax on paper gains that didn't actually happen and might never happen. It's an advance tax on 'maybe' income. That's fundamentally wrong, no matter who it impacts.
Trust me, the people with more than 3 million in super don't need or want your sympathy. But you will need theirs when the reaction to this tax hits the economy and hurts everyone - the poorest the most. They will simply move their investments to where they are not unfairly taxed. And the whole of Australia will pay for the Treasurer's stupidity. This kind of tax crashed the German and Swedish economies. But apparently we have to learn the hard way. I hope you don't suffer too much.

 

[Rain72]

If someone's $3M+ SMSF is all property & too little cash, that's their mistake. They need an incentive to properly diversify their mix of assets.

And the logic equating selling an investment property as reducing the rental pool is an epic fail. The property doesn't vanish. Either another investor purchases said property, so no nett change, or if prices do drop a previously renting person/couple/family purchase it reducing the rental market by 1 but also reducing the renter population by 1! No nett change!

And what about farmers who hold their family farm in a super fund? Businesses who have their business in a super fund? And your statement about cash is ridiculous. People should not and do not hold hundreds of thousands in a super fund in cash just to pay a tax on paper gains that might never actually happen. What happens when the value of the asset falls? They've paid tax on a gain that never happened.

This is fundamentally wrong in every way. And it sets a very dangerous precedent. It will do huge damage to the economy. Ultimately we will all pay the price for the Treasurer's stupidity.

 

[Rain72]

If it was indexed to CPI I wouldn't have a problem with it. The problem is that it is not. If its not indexed at the beginning it never will be. Sure, it might only affect a small percentage of retirees now consider what $1m would have got you in 2000. It will be disastrous for future generations. It will also have a major impact on farmers and small business owners who seriously may have to sell off assets to pay the tax. Simply a DEATH DUTY by another name. As for the tax on unrealised capital gain with no adjustment for when the value of an asset goes down, this will finally be the downfall of this reckless, big spending woke Government to its knees.

Lack of indexation is a flaw, but it's not the major problem.The major problem is the whole concept of taxing unrealised gains - gains that never actually happened that and might never materialise as real money. Where do we go next? Tax the wages you might earn in 2035? Tax the increased value of the family home, or the antique grandfather clock your grandmother left you? This is an insidious and downright evil tax that should never be part of our tax system. It sets a terrifyingly dangerous precedent.

Tax real gains by all means. The super tax system does need to be reformed. But taxing theoretical money is not on. No sensible person would ever entertain the idea.

 

[Rain72]

If I only I had $3 million to worry about taxes.

People who have $3 million aren't worried. They are moving their investments. And in doing so, they will hurt the economy and make all Australians poorer. And you, along with every other citizen, will pay for this insidious and evil tax

 

[Rain72]

There will be many more governments in power before our young people reach retirement. The tax could be removed, increased, the threshold changed by then.

Hopefully removed, because it is the most evil and dangerous tax ever contemplated, and it will do major harm to the economy. It was removed quickly after being introduced in Sweden and Germany, because it became clear very quickly that it was doing major harm. It caused a huge economic downturn. But apparently we can't learn from others. We have to crash our own economy and find out for ourselves.

 

[Rain72]

Why set a new type of tax that sets a dangerous precedent and does nothing to address the huge cost of superannuation tax concessions and the gross inequity of a system that gives huge concessions to high income earners and minimal benefit to low income earners?
Fifteen years ago, Ken Henry proposed the obvious solution to unfair taxation of superannuation - one that would benefit the taxpayer enormously and make the system fair. Simply change the 15% flat tax on super to a 15% reduction from the member's payable tax rate. Instead of paying 15% tax, a low income earner whose tax rate is 18% would pay 3%. Conversely someone whose top rate of tax was 42% would pay 27%.


Taxing unrealised gains is a political move and a very dangerous one. It is not about equity or reducing the use of super as a tax haven, and it's not about revenue - because those hit by it will simply move their investments elsewhere to avoid this unfair attack. It is a bad tax that threatens to pave the way for an insidious tax system that attacks investment. Ken Henry's solution was far better in every way. But this government won't progress a reform that makes them and their rich buddies pay more. Better to attack a small sector of the community because they can lie to get support for doing that.

 

[Rain72]

Sorry, but we are talking $3m plus here. How many ordinary, everyday Australians have that much in their super account. How many people need $3m plus to live a comfortable retirement? Only those that were living an extravagent life before retirement, and those that are using the Super system to dodge tax. Keep in mind, your super is still earning you plenty if you have invested it wisely. What is all the fuss about?

You are missing the point entirely. This type of tax is patently unfair and dangerous. It's not about who will pay. It's about the type of tax and the precedent it sets. And there are much fairer and better ways to make the system fairer. Ken Henry suggested the obvious solution to inequities in the super system fifteen years ago: simply change the 15% flat tax to a 15% concession on the member's marginal tax rate. That would boost retirement savings for low income earners enormously and slash the huge cost of superannuation tax concessions by reducing the unfair benefit to high income earners.
Taxing asset gain sets a very dangerous precedent. It's bad policy. And that's what the fuss is about. Once you open the door to taxing profits that only exist on paper and may never be real, you've opened a real can of worms and posed a serious threat to the economy and to overall fairness in the tax system. And some of those hit by this tax are not wealthy at all, but hold a business or family farm that is their livelihood in their super fund and will be bankrupted. Others are investing in real estate to provide rental accommodation and will either raise rents or sell up and reduce the availability of rental accommodation, pushing prices up. And still others are investing in startup businesses or innovation and will move their investments off shore, reducing enterprise and innovation in Australia.
This isn't hitting people with huge incomes who are using the super system to build massive war chests for retirement. It's entirely political. And once accepted, it paves the way to be extended to all kinds of assets - even the family home. Then the adage ''you will own nothing and be happy'' will be realised.

 

[Rain72]

And that's without the pension, ample money for most people.

And that is totally irrelevant to the issue - which is whether or not completely changing the tax system to make it okay to tax income that doesn't exist is acceptable. And it isn't, no matter who is targeted. Because it sets a very dangerous precedent and introduces a fundamental unfairness into a system that has worked relatively well for over a century.
The super system was devised to be an unfair tax benefit to high income earners, and Ken Henry proposed fixing that 15 years ago, by changing the 15% flat tax to a 15% concession on the member's marginal tax rate. That would address the horrendous cost of superannuation tax concessions in a way that would make the whole system fair and equitable, benefiting lower income earners and helping them build retirement savings while reducing tax avoidance by high income earners. Why is the treasurer moving toward a dangerous new type of tax that will save a minimal amount and be patently unfair instead of adopting the obvious fair and equitable solution? It's a political move designed to set a precedent. And it should be vigorously opposed by everyone.
Please stop focusing on who will or won't pay and whether they can afford to. Few will pay it, because wealthy people have many options for moving investments and they will do so - in ways that will hurt the economy. The issue is that taxing paper money that doesn't exist and might never exist is fundamentally wrong.

 

[riskydave]

Resorting to this just shows how desperate this government is to try and claw back some money somehow.

 

[Rain72]

Resorting to this just shows how desperate this government is to try and claw back some money somehow.

They would claw back a lot more, make the system much fairer, avoid setting a dangerous precedent with a very insidious tax, and avoid major economic damage that is threatening if they simply adopted the Henry proposal from 15 years ago. Change the tax on super from a flat 15% to 15% reduction from the member's marginal tax rate. Low income earners pay less and build a healthier retirement fund, saving on the aged pension eventually, while higher income earners are prevented from abusing super as a tax haven. Makes far more sense.
But I guess high income earners would never change laws to make their own tax bill higher and fairer.

 

[Leenie]

Pensioners are also told they are earning more on bank savings than they are , deeming rates that are non existent.

 

[Zorro56]

You are missing the point entirely. This type of tax is patently unfair and dangerous. It's not about who will pay. It's about the type of tax and the precedent it sets. And there are much fairer and better ways to make the system fairer. Ken Henry suggested the obvious solution to inequities in the super system fifteen years ago: simply change the 15% flat tax to a 15% concession on the member's marginal tax rate. That would boost retirement savings for low income earners enormously and slash the huge cost of superannuation tax concessions by reducing the unfair benefit to high income earners.
Taxing asset gain sets a very dangerous precedent. It's bad policy. And that's what the fuss is about. Once you open the door to taxing profits that only exist on paper and may never be real, you've opened a real can of worms and posed a serious threat to the economy and to overall fairness in the tax system. And some of those hit by this tax are not wealthy at all, but hold a business or family farm that is their livelihood in their super fund and will be bankrupted. Others are investing in real estate to provide rental accommodation and will either raise rents or sell up and reduce the availability of rental accommodation, pushing prices up. And still others are investing in startup businesses or innovation and will move their investments off shore, reducing enterprise and innovation in Australia.
This isn't hitting people with huge incomes who are using the super system to build massive war chests for retirement. It's entirely political. And once accepted, it paves the way to be extended to all kinds of assets - even the family home. Then the adage ''you will own nothing and be happy'' will be realised.

I found your comments very enlightening, and I am now looking at this issue from a different perspective. Thankyou for putting forward a logical alternative view.

 

[Ettyboo]

They were put back in, so a lot of seniors must have voted for them

 

[Wombat2u2004]

What a load of Rightwing rhetoric.

 

[MFargher]

Labor doesn't mind destroying middle income by taxing their superannuation, but at the same time excludes politicians and judges who have far more than the middle income.

Number one it was the Labor party that set up the superannuation funds with the unions administrating the union run plans this in itself is a conflict of interest.

Number two before the contributions are transferred to the superannuation funds they have already taxed them and then they tax the same amount again with another 15%, now they want to tax them again at 30% but not only the contributions but they want to deem the profits and tax them at 30% .

Number three are they going to refund the tax if there is a loss?

With regards to property Mr Albanese has ten rental properties will there profits be taxed, I'm sure his not the only politician with rentals.

There seems to be one rule for them and another for the people.

The Labor party were the ones that corporated government and all government departments. Every politician is currently sitting in treason and every legislation passed since 1973 is illegal and are not valid. Under the constitution the people rule not the politicians and the last election was invalid. They do not have any right to make any decisions on behalf of the people. I'm sorry but the people need to Start standing up and we all need to write to the King of England Ireland that we do not recognise these fictitious the people who pretend to run this country for the people. The king needs to take action and remove them and take action against them . The people of Australia did not give anyone permission to corporate the government and judges. We voted against becoming a republic as we voted against councils becoming corporations. Same goes for the voice. They have not listened to the people and they have abused their power and wasted our taxes.

 

[BruceC]

And what about farmers who hold their family farm in a super fund? Businesses who have their business in a super fund? And your statement about cash is ridiculous. People should not and do not hold hundreds of thousands in a super fund in cash just to pay a tax on paper gains that might never actually happen. What happens when the value of the asset falls? They've paid tax on a gain that never happened.

This is fundamentally wrong in every way. And it sets a very dangerous precedent. It will do huge damage to the economy. Ultimately we will all pay the price for the Treasurer's stupidity.

The super tax and the farmers tax are two seperate issues.
And guess what?
The braindead fools of Australia voted for these clowns knowing exactly what they were going to get..
They had the chance to stop this a month ago but gave Albanese a bigger mandate to do it..

 

[JedCorella]

You voted this shower of shit back in for another three years, he's doing to country what a marine steward did to his mother in spades? Born one still one!.

Too bad his mother didn't terminate her pregnancy. Australia would be a better place without I'll B Sleazy at the helm!