Proposed Superannuation Tax Reform: What It Could Mean for Dairy Farmers
Recent developments in Canberra around proposed changes to superannuation tax law could have real-world consequences for South Australian dairy farmers—especially those who manage self-managed super funds (SMSFs), rely on long-term asset growth for retirement planning, or are navigating intergenerational business transitions.
Labor’s current proposal, announced in 2023 and still under debate, would introduce a 30% tax on earnings within superannuation balances over $3 million—but critically, it includes unrealised capital gains. This means farmers could face a tax bill on an increase in the paper value of an asset (like farmland), even if that land hasn’t been sold and no income has been received from it.
With the Greens holding the balance of power in the Senate, this plan is now being challenged, and alternatives are being explored—some of which could be more favourable to those in agriculture and small business.
The Core Issue: Taxing Unrealised Gains
Labor’s proposal taxes not just the income or actual realised profits from assets in a super fund, but also theoretical paper/unrealised gains—what those assets have increased in value by on paper. This is a significant shift in how super is taxed.
Why this matters for farmers:
- Farmland and business assets often increase in value over time, especially with inflation and changing land use.
- Many farming families use SMSFs to hold farmland or farm-related investments.
- A tax on unrealised gains means paying tax even when there’s no income to support it—a serious cash flow problem in a business with tight margins.
For example, if a super fund holds farmland that increases in value by $500,000 in a year—even without selling it—the fund could face a tax bill of $150,000 under the Labor plan. This could force asset sales or borrowing to pay the tax, undermining retirement plans and the long-term viability of family operations.
The Greens' Alternative Proposal
This week, it emerged that the Greens policy team is reviewing an alternative model that would avoid taxing unrealised gains entirely. The plan, developed by former Westpac pricing director Kerry Hore, proposes:
- A flat 20% tax on super earnings (up from the current 15%),
- A 5% rebate for accounts under $3 million,
- And no tax on unrealised capital gains.
Economists like Chris Richardson and Saul Eslake support this more straightforward model, calling the current Labor proposal a “flawed bit of stickytape” and “not fit for purpose.”
The Greens have also previously argued for lowering the $3 million threshold to $2 million—but unlike Labor, they support indexing that threshold so it increases over time with inflation. Labor’s current plan does not include indexation, meaning more Australians, including many farmers, would eventually be caught in the higher tax bracket simply due to inflation and land appreciation.
Where It Stands Now
- Labor insists the proposal has a mandate and says it will not change its policy.
- The Greens have not yet formally endorsed an alternative but are actively consulting and assessing alternatives.
- The proposal’s fate could come down to negotiations in the Senate, where the Greens hold a key vote.
What It Means for South Australian Dairy Farmers
This debate may seem distant from day-to-day farm life—but it could have long-term consequences for many of our members:
- Farm succession and retirement planning could be disrupted if super fund balances are penalised based on asset value, not income.
- Cash flow stress could emerge for SMSFs holding property, especially during downturns or dry seasons.
- Younger farmers inheriting wealth through super structures could be impacted if assets need to be sold to cover tax bills.
SADA will continue to follow this issue closely and advocate for a sensible, fair approach to superannuation taxation—one that recognises the unique structure of agricultural businesses and protects the ability of farming families to plan for the future.
What Can You Do Now?
- Speak to your financial adviser or accountant about how these proposals may impact your retirement plans or SMSF structure.
- If you’re part of a family business, consider reviewing your succession strategy and super balance projections.
- Keep an eye on SADA’s newsletters for updates—we’ll provide the latest information as the Senate debate unfolds.
For any members with concerns or questions about these developments, please feel free to reach out to the SADA office. We are here to help make sense of the policy landscape and ensure the voices of South Australian dairy farmers are heard in Canberra.