The Great Superannuation Shell Game: When Tax Rorts Come Home to Roost
I’ve been following the debate around Jim Chalmers’s proposed superannuation reforms with fascination, particularly the story about farmers supposedly “scrambling for answers” when faced with the prospect of paying more tax on their multi-million dollar super balances. The more I dig into this, the more it becomes clear we’re witnessing the death throes of what can only be described as a spectacular tax rort.
Let’s cut through the noise here. The ABC story features a farming family with a combined super balance of $5.5 million who are upset they might have to pay an extra $120,000 in tax annually. But here’s the kicker - if they’re paying $120,000 in tax, they’re making over a million dollars a year through their super fund. And they’re complaining about this?
The family’s own son, who appears to be their accountant, admits they structured their affairs specifically “to help with inheritances for the other kids.” There it is, plain as day - they’re using superannuation as a tax minimisation vehicle for wealth transfer, not retirement savings. This is exactly what super was not designed for.
What really gets my goat is how this story has been framed. We’re supposed to feel sympathy for people who’ve gamed the system for decades, paying a measly 15% tax rate on massive earnings while ordinary workers pay full marginal rates on their income. The audacity is breathtaking.
The farming angle is particularly cynical. Yes, farmers face genuine challenges, but this isn’t about struggling agricultural families. This is about wealthy landowners who moved their 115-year-old family farm into a self-managed super fund specifically to dodge tax. They’re now crying poor because the loophole is being closed.
Someone in the discussion threads nailed it perfectly: “Super is meant as a retirement device, not a wealth building loophole.” The entire purpose of superannuation’s concessional tax treatment is to encourage people to save for their retirement so they don’t burden the pension system. When you’ve got $5.5 million in super, you’re well beyond needing any government support in retirement.
The proposed Division 296 tax isn’t even that harsh - it’s a 15% tax on earnings above $3 million, bringing the effective rate to 30%. That’s still more generous than what most workers pay on their regular income. And yes, taxing unrealised gains is unusual, but we already do this with land tax and other wealth-based taxes.
What frustrates me most is the complete lack of self-awareness from these complainants. They’ve spent decades paying minimal tax on massive wealth accumulation, and now they’re positioning themselves as victims when asked to pay their fair share. Meanwhile, young families are being slugged with high marginal tax rates while trying to save for their own retirements.
The whole saga reminds me of that classic quote: “When you’re accustomed to privilege, equality feels like oppression.” These wealthy farmers have been living in a tax-minimised bubble for so long that paying normal rates feels like persecution.
Here’s the thing though - even with these changes, they’ll still be better off than if they’d kept their assets outside of super. The concessional treatment remains, just not quite as generous for the mega-wealthy. They can still pass their farm to the next generation through existing capital gains and stamp duty exemptions available to farmers.
The real tragedy isn’t that wealthy farmers might pay more tax - it’s that this rort was allowed to continue for so long. Howard’s removal of super contribution caps opened the floodgates for this kind of behaviour. The largest self-managed super fund in Australia now holds $1.6 billion, all taxed at just 15%. That’s not a retirement fund, that’s a tax haven.
I genuinely believe we need to support farmers, but through proper agricultural policy, not tax dodges that benefit the wealthy few. Income averaging, drought assistance, and infrastructure investment - these are the tools we should use to help struggling farming families, not allowing multi-millionaires to park their assets in tax-sheltered super funds.
The proposed reforms aren’t perfect - I’d prefer to see the threshold indexed and perhaps some tweaks to how unrealised gains are calculated. But the fundamental principle is sound: superannuation should be for retirement, not for minimising tax on massive wealth transfers.
It’s time we stopped pretending that closing obvious tax loopholes is somehow unfair to the wealthy. The real unfairness is asking ordinary workers to subsidise the retirement savings of multi-millionaires. Let’s get this reform passed and move on to fixing the other inequities in our tax system.