Small business irate over possible capital gains tax hike for self-managed super funds

Small business is fuming over reports the federal government could be considering charging capital gains tax on properties held within self-managed superannuation funds, saying such changes will hurt SME owners.

The rumoured changes come after Superannuation Minister Bill Shorten yesterday said the government would be making changes to the superannuation system but these would only affect the highest income earners.

New reports suggest the government could apply capital gains tax to properties within SMSFs. This comes weeks after warnings were first raised regarding the government’s interest in targeting residential property in SMSFs.

Typically, an investor selling a property will pay capital against tax at the marginal rate of 45 cents in the dollar, but in the super system, if the property is sold after the investor turns 60 no capital gains tax is paid.

Many entrepreneurs place their property assets in these types of super accounts. The plan, which according to The Australian Financial Review is possibly under consideration, has already drawn ire.

“As small business owners, our lives are based around our assets,” Council of Small Business of Australia chief executive Peter Strong told SmartCompany. “It’s almost an attack on small business.”

The supposed plan would see capital gains tax charged when properties move into the pension phase of an account, meaning SMSF owners would be charged more money as they near the point where they are able to draw funds.

“When you have an asset like a property and it’s an integral part of your business, it seems unfair to change the rules and then dictate when you can retire.”

Treasurer Wayne Swan and Superannuation Minister Bill Shorten did not move to quash the rumours after both made comments yesterday about upcoming changes to the super system.

While no details have been revealed, the changes are expected to hit higher income earners.

But Strong says any change to the SMSF system will upset entrepreneurs in a big way.

“They want us to contribute to a very inefficient superannuation system when we’re better off doing it ourselves,” he says.

Strong says there is a “lack of confidence” among entrepreneurs when it comes to the super system, which is why they choose SMSFs. Any tax changes, he says, could nullify that confidence.

“It’s a whole new dynamic if they just alter tax,” he says.