Taxing unrealised gains and increases to the total super balance are just two of many challenges to the proposed government change.
and the resulting debate has been interesting for super practitioners. For decades we’ve buried ourselves in the minutiae of super rules and suddenly everyone has a strong opinion on complex rules we struggle with daily.
However, taxing unrealised gains creates super fund cash flow issues where there isn’t a corresponding sale to fund the tax. Taxing at the total balance level rather than on an individual asset level also affects the capital gains tax calculation. There are also mechanical problems with indexing. Assuming the TSB is indexed and increased in $100,000 increments, then if inflation is above 3.33 per cent in year 1, then indexation on the $3 million TSB will kick in in every single year. By year 10, inflation only has to be more than 2.5 per cent for indexation to kick in.If you compare this to other super indexation, inflation on the non-concessional cap only kicks in when cumulative inflation is over 9 per cent . It changes far less often.
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