Corporate leaders enter the fray over proposed $3m super tax

Over the past week, corporate leaders such as Wilson Asset Management chairman Geoff Wilson AO, former QSuper chair Karl Morris, CSL chairman Brian Mc­Namee, and Moelis chief executive Andrew Pridham have openly condemned Labor’s plan to tax unrealised capital gains as part of its proposed Division 296 tax.

Calling it a policy mistake, Morris told The Australian the tax is “totally ill-conceived”.

“How does anyone with illiquid assets like a rental property, farm or any long-term investments like infrastructure manage short-term market movements?”

Speaking to ifa’s sister brand, SMSF Adviser, Wilson said big business had refrained from speaking on the matter previously because of the significant power industry and union funds yield.

“I take my hat off to Brian McNamee for standing up because it now makes it easier for others to do the same.”

Wilson said the active campaigning against the tax comes as many in the corporate world have understood the significant unintended consequences of the proposed policy on not only individuals but the broader economy.

“We have just released a discussion paper which shows that the negative impact of this tax is close to $100 billion,” he said.

The discussion paper, which analyses the impact of the proposed tax, ultimately concludes that it is “a policy fraught with economic risks, unintended consequences and practical challenges”.

“Instead of pursuing this economically unsound and practically challenging tax, policymakers should reconsider their approach and explore alternative strategies for revenue generation and superannuation policy that are more efficient, equitable and supportive of Australia’s long-term economic prosperity,” the paper reads.

Elaborating further on the matter, Wilson said: “I’m giving the government the benefit of the doubt that they were naïve about this, but if introduced, it will be a negative thing for investment and risk-taking capital will go offshore.”

He highlighted that investors are already suggesting the proposed tax would “destroy” them, with many planning to take their SMSF balances below $3 million before June 2026, to safeguard their savings.

“There will be $25 billion-plus taken out of SMSFs almost immediately,” he said.

“And where is the money going to? A significant amount will go to children and grandchildren or themselves, investing in the family home. We estimate that around $150 billion will go into housing.”

Adding his two cents to the debate, Jamie Green, executive chairman of PrimaryMarkets, said on Tuesday: “Essentially, this is a tax on hypothetical profits.”

Describing the proposal as a “Trojan horse”, aimed at “normalising the idea of taxing unrealised gains”, Green said, once accepted within the superannuation system, it will likely be expanded to cover all assets, including shares, property and private investments.

A further concern, he said, is the risk of encouraging short-termism across Australian markets.

He opined that the tax would encourage investors to sell assets every year to cover tax bills, resulting in a rolling 12-month investment cycle rather than building long-term portfolios.

“Even ordinarily liquid ASX-listed shares could become problematic under this system if, for example, investors are subject to escrow periods preventing immediate sale while still being taxed on paper gains,” Green said.

Ultimately, he warned, the mass withdrawal of money from superannuation, especially from SMSFs, to stay under the $3 million threshold could leave Australia’s entrepreneurial ecosystem severely weakened.

According to The Australian, a recent Parliamentary Budget Office (PBO) calculation shows that if the Division 296 tax is implemented, it will raise nearly $7 billion a year within 10 years.

Wilson further suggested this “Trojan horse” approach would push people to change their behaviours, making it unlikely the revenue forecast made by the PBO would come to fruition.

“The bureaucrats may have worked out the calculation, but people will change their behaviour and the government won’t get that.”

So far, big super funds have defended the $3 million super tax increase through their industry associations, with ASFA CEO Mary Delahunty stating earlier this month that concerns over taxing unrealised gains are being exaggerated.

“ASFA believes that the tax on earnings on assets above $3 million is a worthwhile pursuit, the bill and the shape that it’s currently in, obviously, has some hairs on it,” Delahunty said at an election event hosted by Super Review’s parent company.

“I’m not as concerned on the taxation of unrealised capital gains as some other commentators are. I think we’re all fairly familiar with land tax, that is also a taxation system that is based on unrealised capital gains.

“Whether or not that means you need to pay the tax at the time, or whether or not there should be some reform done to that bill that would see a debt held over. Those are the sorts of issues I think an incoming government might want to tackle if they want to bring more equity to the tax incentives in superannuation.”