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.

 

[Rain72]

Wait for the damage and see if it's ''right wing rhetoric''. I assure you it is not. This dangerous tax will do massive harm to the economy. It has done in France, Norway, Sweden and Germany. All of those countries had to scrap it due to the economic harm
Expert modelling shows that $94.5 billion would be removed from the Australian economy and $155 billion of superannuation savings would be redirected into tax-free structures such as principal places of residence, exacerbating the housing affordability crisis that already weighs on younger Australians.

Funny that every time the left proposes something radical and conservatives say it will cause harm, conservatives are proved right. Just look at the electricity prices! Left said renewables were cheaper. Clearly not! Left said superannuation would eliminate the need for the aged pension and give all retirees security. How many retirees are now living in poverty? And the govt is complaining about the cost of aged pensions, but Treasury reports that superannuation tax concessions cost more, and 80% of that money benefits high income earners.

 

[Rain72]

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..

Super tax and farmers tax are definitely NOT separate issues. Many family farms are held in super funds that will be impacted by this insane unrealised gains tax.
As for giving Albo a mandate - only about 1/3rd of the nation voted for him and he imported a lot of votes to rig the election. Most of us did NOT want Labor returned.

 

[Rain72]

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

I doubt it. Two thirds of the nation didn't want Labor returned.

 

[Rain72]

Modelling has shown that if this unrealised gains tax on super over $3 mil is implemented, $94.5 billion would be removed from the Australian economy and $155 billion of superannuation savings would be redirected into tax-free structures such as principal places of residence, exacerbating the housing affordability crisis that already weighs on younger Australians.

Anyone thinking it only impacts a small number of wealthy people couldn't be more wrong. It is going to hurt everyone, badly,

 

[duckiedoodle]

This is not a fair tax, especially to those who have worked hard all their lives, have bought properties along the way so that when they retire they can sell and won’t live off the taxpayers.
Not everyone is a cheat and liar, so why should they all be put in the one basket.
If many, who have taken responsibility for their retirement, not enjoy the fruits of their labours.

Seeing that those who make these decisions, Politicians in general, whom have their own superannuations set up completely different to us normal people, will they also be taxed on their money and all their other investment houses, I bet NOT.

We all know that the very wealthy employ accountants and in doing so, what is on paper is very different to what they hide.

As per normal, Australia is one of the worst Countries for taxing absolutely everything and now they are hitting those who wish to just have a happy and comfortable retirement.

Pollies are exempt from this tax, of course

 

[eatmeatandlift]

Labor wants to wipe out the middle class. They want everybody to be poor, I fear that the tax will expand to other assets and super under 3 mil.
WEF agenda, you will own nothing!

 

[Jen61]

Labor governments rarely think things through and this invariably results in unforeseen consequences. This "tax" (or government theft) will have a devastating impact on the economy and, in particular, the rental market. And if you're young and think you'll escape these consequences, think again. We were warned about another labor government, but clearly didn't listen. We get the government we deserve.

It's not a new tax, it's reducing a concession on super of over $3 million. Only 0.5% of super accounts will be affected. Rich crying poor again. I don't care if they "worked hard' for it. A lot of people work hard and have far less super.

 

[MFargher]

This is an over reach. It's all about you will be happy when you have nothing. Note how it affects the middle income while the politicians who are super wealthy avoid it. People like Andrews, Albo and all other politicians who millions in their accounts and ten and more properties don't get affected. Where in the normal world to CEO's continue to be paid hundreds and thousands of dollars after they leave employment. Time for the people to start protesting about the waste at the top. Taxpayers will save billions at this level. Also time to freeze their pay they are getting paid half million compared to the English politicians who gets 70,000 pounds. Talk about fat cats at the top on a never ending drip. This has to change.

 

[Franno]

Totally unfair. Labor playing the politics of envy AGAIN. How about farmers? How many will have to sell a part of a productive farm to pay the tax? absolutely disgusting tax. You voted for this Australia. You get the government you deserve.

 

[Rain72]

It's not a new tax, it's reducing a concession on super of over $3 million. Only 0.5% of super accounts will be affected. Rich crying poor again. I don't care if they "worked hard' for it. A lot of people work hard and have far less super.

Nothing to do with rich crying poor. Those impacted will simply move their investments to avoid it and that will damage the economy and everyone will suffer - the poorest most of all. It's not about who has how much super. Taxing paper money that doesn't actually exist is the most dangerous concept ever thought up - and patently unfair no matter who it impacts.

It IS a new tax. We have never before in history had a tax on money that doesn't actually exist. Taxes on unrealised gains have caused major economic harm in Norway, Sweden, France and Germany - but apparently Australians are too blinded by jealousy or taken in by lies to learn from other nations.
Economists estimate this tax will send $94.5 billion in local investment overseas and redirect $155 billion into tax-favoured areas like the principal residence (which will drive house prices and rents up up up - again!). It also sets a very dangerous precedent. Once taxes are applied to paper money - that doesn't exist and might never exist as real income or profits - the concept can be extended to all sorts of areas, like the family home.

Among the worst hit by the tax as it stands are farmers who hold their farm in their super fund. They are NOT rich. Their land may be valuable, but many are struggling to make a living from it. When they have a good year, they get slugged twice - once on their real income, then again on the theoretical increase in the value of the farm. With no actual money to pay the second tax, what do they do? Sell one paddock? And what happens next year when they have a bad year and the value goes down? They don't get that money back.

Please STOP and think about the wider implications of policies. Every action has a reaction - and this one has very harmful reactions that will hurt all of us.

If the Treasurer was telling the truth about wanting to reduce concessions, he would do what Ken Henry recommended 15 years ago. That would make the system fair, slash the cost of superannuation tax concessions, and improve retirement benefits for lower income earners. It is an easy and very sensible fix. Why won't he do it? Because it would stop high income earners from using super as a tax haven - permanently and in a fair manner. And that would hurt politicians and their rich mates. Can't have that!

 

[Rain72]

It's not a new tax, it's reducing a concession on super of over $3 million. Only 0.5% of super accounts will be affected. Rich crying poor again. I don't care if they "worked hard' for it. A lot of people work hard and have far less super.

Please stop listening to political lies When your food bill and rent go up, you can blame this new ''not a tax' that jealous liars are telling you will 'only affect 0.5% of super accounts'.
It won't actually affect many with more than $3 mil in super, love, because most will move their investments to avoid it. That's what rich people do. That's why they are rich. But it WILL send billions of investment out of the country, hurting the economy and driving a need for higher taxes. It WILL impact struggling farmers, small businesses, owners of investment properties that are rented out. That will drive all prices - and particularly food, house prices and rent - up. YOU will pay.

 

[Monty M]

FACT:According to the OECD, Australia's tax-to-GDP ratio in 2022 ranked 29th out of 38 countries, indicating it's not a high-tax country. Australia's tax revenue is lower than the OECD average, and some tax components, like the GST, have even seen a decrease in revenue generation,

 

[Rain72]

FACT:According to the OECD, Australia's tax-to-GDP ratio in 2022 ranked 29th out of 38 countries, indicating it's not a high-tax country. Australia's tax revenue is lower than the OECD average, and some tax components, like the GST, have even seen a decrease in revenue generation,

Irrelevant. The type of tax being proposed is the problem - not who will or won't pay it nor how much it is or how much it adds to a total tax burden. Unrealised gains tax is an insidious, dangerous and dishonest tax on money that doesn't exist. You don't have any cash to pay it. Ir's on theoretical paper money.

Consider this: About 15 years ago, a relative bought a house in Townsville for $156,000. Five years later, it was valued at $360,000. That's a $204,000 gain, but they were living in it, so there was no money to pay if a tax had been imposed. They would have to borrow $61,200 to pay the tax. A few years later, property prices in Townsville crashed. The property was old and deteriorating due to age and wear and tear. They put it on the market and the best they could get was $180,000. So they would have paid $61,200 PLUS the interest on that loan for several years, and only realised an actual gain of $24,000 (minus rates and maintenance costs).
Now, if that home were held as an investment property, rented out, in a super fund with more than $3 million, the owner would have paid at least $54,000 tax on income that never happened and will never happen.
Farmers will be paying tax on the value of their farm, whether or not it produces much income. Small businesses will be paying tax on the theoretical value of the business, regardless of real worth and income. Landlords will have to put rents up to cover the tax bill because there's no real money to pay it.

The worst aspect of this is that it is unnecessary, unproductive, futile, and really nothing more than a political attack. If there was a genuine revenue issue, Ken Henry recommended the perfect fix 15 years ago and it would eliminate all abuse of superannuation to dodge tax, make the super system fair, improve retirement for low income earners, and save the nation in excess of $44 billion a year - all of which currently flows to high income earners.

 

[waggadragon]

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.

Finally someone understands this tax it is a breath of fresh air in comparison to some of the others who are commenting

 

[tumoulin]

$3 million is too much. Reduce it to $2 million and index it. Great to see the government finally acting to get rid of one of the tax avoidance measures the rich love because nearly all the benefits go to them.
Next to go should be negative gearing on existing property. NG should only be available for new builds which add to housing stock. Then capital gains tax concessions should be dumped.

 

[Squizzy1]

I totally agree What is it with Australians & the tall poppy syndrome. If it wasn't for the people who have worked hard all their lives & don't depend on the tax payer to look after them & often have a business & employ people, you maybe without a job! And then they are punished for their hard work & trying to get ahead & support themselves comfortably. And you are right! The politicians don't pay this tax until they retire. Now is that fair??

What has any of that waffle to do with limiting the super concession rules above $3m.

 

[Squizzy1]

I agree with the Super tax change, the concession was to encourage people to save for their after work life, not as a wealth building/tax dodging medium, and those who have all their assets in Super are doing just that imo. It is rumoured people like Gina have $100m in Super the proceeds of which are tax free, this was not the intent, so ofcourse they want to protect their interests at the less fortunate's expense. If it exposes all those who have been rorting the system and forces them to change their habits/sell etc all the better.

 

[Bill MacL]

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!

Let's not forget that properties will get revalued many times as well. The younger generation have been well and truly screwed before they even reach retirement age.

 

[Ittybitty]

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!.

The preferences got him over the line, not people actually ticking his box otherwise he would have lost. This preference garbage has to stop also the 2 party rule

 

[Ittybitty]

I just hope all the politicians past & present have the same rule