🌾 Are farmers being screwed by Labor’s super tax?
Farmers are the backbone of Australian society — so why the hell is the Government trying to screw ’em over with a new tax on super?
At least… that’s what some people would have you believe.
But let’s take a look at what’s actually going on.
📚 What super was meant to do
Robert Breunig, Professor and Director of the Tax and Transfer Policy Institute at ANU, said for the vast majority of people, super is working as it’s intended to work.
“You put money in as you work, that money accumulates. It’s taxed at a very low rate, and when you retire, you have a pot of money that you can do as you wish.”
In theory: you work, save into super, and eventually retire with enough to look after yourself — no pension required.
That’s the whole point. A social safety net built around self-reliance.
💰 So what’s the new tax?
Labor is introducing a new tax on super — but it only applies to accounts with more than $3 million in them.
It’s an extra 15% on the growth of your super above that amount.
The government reckons this will only affect the richest 0.5% of Aussies.
The Coalition says it’s a disaster. And according to shadow treasurer Ted O'Brien they’ll oppose the tax “every step of the way.”
NSW Nationals MP Micheal McCormack says it’s a “policy dreamed up in inner-city boardrooms.”
🧾 But what’s the point of self-managed super?
For people who are self-employed, who are not getting a wage and salary from an employer, self managed funds give an opportunity to put something into a superannuation.
“If I’m running my own business and I don’t have any employees, I needed a way to be able to save at the tax-free rate that other people have saved.” Breunig said.
🚜 But what about the farmers?
People put their farm or business into superannuation mainly to take advantage of the lower tax rate that super funds offer.
Normally, if you run a business outside of super, you might pay a corporate tax rate of 25% (for small businesses) or higher.
However, if you run that business or hold that farm inside a super fund, the tax rate is only 15%. This creates a significant tax saving.
Breunig said he has some sympathy for people who have put businesses or farms inside of self managed super funds.
“These people did not break any laws. They followed the rules, and now those rules are being changed.”
But he now feels some people “have taken advantage of those rules to do things that’s not at all what we imagined would be done [with superannuation] at the beginning.”
“So now I’m starting to have less sympathy if I think about the fact that, you know, these people have a lot of money. If they were running these businesses through the normal corporate business tax structure, or through a family trust, as a lot of farms are run, they would be paying a higher rate of tax,” he said.
So yeah — not illegal, but some people are running farms while paying less tax than if they’d done it through other structures.
🧮 What could be done?
Breunig has a proposal.
“We say to people: Look, you don’t have to pay that tax immediately. We’ll calculate it, keep track of how much you owe, index it to inflation every year — like a HECS debt — and charge you when the property is disposed of or transferred, when normally there would be some tax anyway.
“And I’d say the same thing about people holding big property portfolios inside these super funds.
But this is a small, small number of people. Initially, the law is going to affect about 100 or 120,000 people. The number of farmers in that group is quite tiny.”
There could be reasonable carve-outs — or at least softer ways to collect it.