The Write Direction: Unrealised taxation

I REMAIN frustrated by the government’s latest tax attack on superannuation funds.

We don’t know what the exact position will be or how it might be altered by the government’s negotiations in order to get it through the Senate, as already the Greens are trying to increase the tax levy in order for it to include many more retirees.

Superannuation was introduced by the Keating government, encouraging people to provide for their after-work lifestyle.

The idea was that retirees would no longer need to put their hands in the government’s pockets in order to create enough income to live comfortably in retirement.

The encouragement was in the form of allowing people to direct some of their income into a super fund account before their normal income was subject to taxation.

The other side of the coin was that these funds could not be accessed until the retirement age was reached and the person was no longer in the workforce on a full-time basis.

No one wants to be without income when their working life is over, so Keating’s encouragement in allowing people to save tax effectively for that purpose by using the superannuation provisions he provided, was warmly accepted.

Now that many of us have followed the Governments’ directions to the letter of the law and provided superannuation accounts for our retirement, guess what they are proposing to do?

That’s right: tax the hell out of us.

Let me provide you with one simple and obvious example of the issue.

Your super fund might have purchased shares in the Commonwealth Bank when it was being changed from a government-owned institution to a publicly owned asset.

One thousand shares in CBA at the pre-offer price of $4 each (so $4000 investment) have now gone up in value due to inflation as well as the bank improving its business outlook over time to now be valued at $175 per share for $171,000 gain so that “profit” is now to be taxed.

The method of taxing these “unrealised “paper profits is yet to be explained.

One method might be to value all super funds on 30 June this year and then revalue them the following June with the rise in value being the amount to be taxed at say the 30 percent rate.

The dreadful reality is that because you have done the right thing by following Government advice, you are now to be penalised in your retirement years by this severe tax because your super fund has done well, as you have, in saving for your retirement.

By John BLACKBOURN