Well it sounds like my speculation last month that the Government might get cold feet about major tax reforms was premature.
If big changes to capital gains tax are introduced it will be interesting to see how that translates across to super.
So far, the indications seem to be that super funds would continue to get a 33% discount even if individual taxpayers lose the 50% discount and go back to a “cost base adjusted by inflation” approach. The argument I saw in one news article was that the 33% discount was likely to give around the same result as the indexation approach. If so, it does make you wonder why the Government wouldn’t consider just replacing a 50% discount with a 33% discount? Surely that would be preferable from an administrative perspective than going back to tracking inflation to adjust cost bases?
And one point I haven’t seen mentioned in my reading yet is that back when we had an inflation indexed cost base approach, we also had a unique mechanism to work out the tax rate applied to the amount of the capital gain that was subject to tax. We didn’t just add the taxable gain to an individual’s assessable income, we determined the tax rate as if that gain had been earned over 5 years. I wonder if that’s also being contemplated?
Of course I’m wondering how this will impact the run up to 30 June 2026, particularly for those impacted by Division 296 tax. In some ways it doesn’t change a thing for some of the key things clients should be considering now : thinking about whether the SMSF will “opt in” for the special capital gains adjustment and if so, getting robust valuations for their assets at 30 June 2026.
I’ve also reflected on all the modelling I’ve done on leaving assets in super vs withdrawing funds “now” or during 2026/27. If anything, I expect it’s likely to make leaving money in super more attractive than it appears at the moment. The transitional rules will be critical.
Let’s hope super has a pretty quiet budget night – I expect accountants, advisers and their clients have more than enough to deal with at the moment.
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