Asset rich, cash poor: Farmers come out swinging against Labor’s plan to tax unrealised gains

Farmers have come out swinging against Labor’s planned changes to superannuation taxation, saying asset-rich but cash-poor farming families may have to sell property to cover the tax.

From July 1, the concessional tax rate will rise from 15 per cent to 30 per cent on the earnings attributable to super balances above $3 million, including taxing unrealised gains on the increased value of farming properties.

Agriculture industry groups have labelled the move “unfair” and “unreasonable”, with unrealised gains being profits that farmers have not received and cannot use until they have sold their land.

National Farmers’ Federation president David Jochinke said 3500 farming families would be instantly hit, with another 14,000 also affected if property values grew above the threshold.

He said the impact would be most felt in multigenerational families where older farmers held their assets in self-managed super funds and leased the day-to-day operations to their children.

This arrangement works because it provides retirement income for the parents, as well as an opportunity for the next generation to start farming.

“Like any property, farmland values can rise, but these paper gains don’t translate to real income. Rises in land values usually mean very little when farms are multigenerational with no intention of being sold,” Mr Jochinke said.

“This tax could force some farmers to sell up just to pay their tax bill.”

Business groups have been consistently lobbying the Government to drop the unrealised gains component of the policy, but Council of Small Business Associations chief executive Luke Achterstraat said the group had not seen “any consideration to change the tax” in two years.

“We’re not necessarily talking about high-net-worth individuals here. We’re talking about a lot of small family and farming communities,” Mr Achterstraat said.

Less than one per cent of Australians have super balances worth more than $3m, but critics claim the proposal could end up affecting more people because it would not be indexed.

It is understood wealthy retirees, including farmers, have been selling assets and restructuring their investment portfolios ahead of the July 1 deadline.

Federal Treasurer Jim Chalmers has repeatedly defended the changes, labelling them “modest” and an “important part” of efforts to make the Budget more sustainable.

“It only applies to a tiny sliver of people, and it is still concessional,” he said.

“This is a modest change, but helps make the Budget more sustainable and fund our priorities.”

When announcing the change back in 2023, Dr Chalmers said about 80,000 Aussies would be impacted or about 0.5 per cent of the population by wealth.

But modelling from AMP deputy chief economist Diana Mousina shows the average 22-year-old today could retire with more than $3m due to wages growth, inflation and compound interest.

Pastoralists and Graziers Association of WA president Tony Seabrook said Labor’s proposal would catch super account holders “trying to do the right thing”, off guard.

“Those that have taken the advice to put their properties into their superannuation, are in a world of pain,” he said.

“People took the advice to do this . . . and it was good advice.

“Asset-rich and cash-poor has been the nature of our business forever . . . to do this is unfair and unreasonable, and fails to acknowledge the impact on rural farming families.”

The move is Labor’s major revenue-raising initiative for its second term of government, with estimates the move will rake in $2.3 billion per year.

The legislation, before Parliament since November 30, 2023, will only require Senate support from the Greens to pass — a likely outcome given they have expressed support for the policy.