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Geoff Wilson takes on The Albanese government's proposed 15 per cent tax on the increase in the value of super funds above $3m.
Geoff Wilson learned to speak up for himself and others from a young age.
The well-known Chairman, Chief Investment Officer and founder of Wilson Asset Management (WAM), grew up with his five siblings in Melbourne’s Glen Iris, where the south eastern freeway then came to an abrupt halt in the middle of working class suburbia.
“Being one of six kids and being the third kid, I had to stand up to survive,” he says.
While his father was a doctor and his mother a nurse, he found school a challenge. After completing a science degree at La Trobe university in the early 1980s, he got his first job at the George Hotel in St Kilda. Yet he says his father, Charles William Edgar Wilson, was a big believer that anything is possible if you really persist and stick to it.
Fast forward many decades and Wilson has become the king of Listed Investment Companies in Australia. WAM has an empire of eight LICs across global equities, domestic equities and alternatives, with $5.9 billion of assets.
“I am fortunate that I am now in a position where I can stand up publicly for what I believe is right,” Wilson says.
“I am very passionate about inequity. The reason we came out so strongly in 2019 was the inequality of Bill Shorten’s proposal on the taxation of franking credits.”
Now Wilson has another Labor Party taxation plan firmly in his sights: The Albanese government’s proposed 15 per cent tax on the increase in the value of super funds above $3m.
“To me this could be as powerful as Bill Shorten’s proposal in 2019 in terms of swaying the election outcome. Australians detest being treated unfairly,” he says.
Under the proposed changes, the government is looking to tax unrealised gains on super balances over $3 million and not index the threshold.
The plan was previously rejected by the Senate during a tumultuous final day of parliament in 2024 when the Coalition, together with Senators Jacqui Lambie and David Pocock, refused to support the legislation.
But now the bill is firmly back on the agenda for debate in the final parliamentary session before the looming federal election.
The legislation would come into force from July 1 this year if it is passed by the Senate.
Federal Treasury says there are estimated to be 80,000 or more SMSF investors with balances ranging between just over $2 million to more than $50 million who are in line to pay additional tax. Their combined assets total more than $175 billion.
But Wilson is concerned that the modelling done by Treasury is four years old and that the number will significantly rise as more people run into the unindexed trigger point due to inflation.
The Financial Services Council is estimating about 500,000 super balances would eventually breach the $3m cap, including 204,000 Australians under the age of 30, highlighting the inter-generational unfairness of an unindexed cap.
“Caps in the superannuation system are indexed to ensure generational fairness, so that each generation gets the same outcomes and benefits from the superannuation system,” Wilson says.
“By leaving the cap stuck at $3m you are effectively knee-capping the younger generation and you are guaranteeing that they will never catch up to the baby boomers who have enjoyed decades of favourable tax treatment of their superannuation balances.”
Wilson believes the global financial crisis also demonstrates the unfairness of the proposal in taxing unrealised gains.
In the 2007 financial year, the ASX All Ordinaries Accumulation Index increased 30.3 per cent, then fell over 50 per cent during the GFC.
Under the proposed legislation, the increase in 2007 would have resulted in a significant unrealised tax liability even though the gain was wiped out two years later.
While a loss can offset future gains under this legislation, there is no provision to claim back tax that has been charged on a gain that disappears due to a subsequent fall in value.
Wilson believes this is contrary to the workings of Australia’s broader tax system.
“It is taking away the incentive to employ risk capital in the Australian economy. Australia has been built on risk capital. I take my hat off to former Prime Minister Paul Keating - the creator of the superannuation system - for building a structure that allows Australians to provide risk capital to business. It has encouraged them to invest in Australian firms that employ Australians and pay franked dividends to Australians,” Wilson says.
“Why have your money in growth assets if you are going to be penalised. It destroys the life blood of Australian commerce.”
The legislation has also raised particular concerns for farmers and small business owners who have large and illiquid assets such farms, factories, health practices or other commercial property in their self-managed super funds.
Not only does super become less attractive for their retirement and inheritance planning, but they could be forced to sell assets to meet tax liabilities.
“The policy could force superannuation members to liquidate investments and assets prematurely to satisfy tax liabilities that should not exist. It will also erode wealth for everyday Australians and discourage risk-taking and entrepreneurship. It could push people into tax havens or into company structures that all undermine the foundations of the superannuation system that our global peers seek to replicate,” Wilson says.
WAM’s initial submission on the bill back in October 2023 recommended indexing the $3 million threshold to keep pace with inflation.
WAM’s proposal also pointed out that taxing earnings over $3 million could be easily calculated for individuals with one superannuation fund, removing any need to tax unrealised gains.
“Given the vast majority of individuals with a $3 million balance currently have one fund or could organise their affairs so that they have one fund, we believe this approach is sensible, practical and in line with current tax law,” Wilson says.
“We continue to strongly urge the government to re-evaluate its proposal and for senators to be aware that the proposed legislation will not only harm superannuants but also jeopardise the access of Australian companies to a trillion dollars in risk capital.”
