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Treasurer Jim Chalmers has firmly rejected a key demand from the Coalition regarding Labor's proposed changes to superannuation tax laws. The Coalition is pushing for the government to abandon the inclusion of 'unrealised gains' in the calculation for the new, higher tax rate on super balances exceeding $3 million. However, Chalmers has stated that this is a non-negotiable aspect of the policy.

The policy, a cornerstone of the government's budget strategy, aims to increase the tax rate on earnings above $3 million from 15% to 28%. A significant point of contention is whether unrealised gains – profits that haven't yet been realised through a sale – should be included in the taxable base. The Coalition argues that including unrealised gains is unfair and would disproportionately impact those who have built up significant superannuation balances over many years.

“We’ve been very clear about the design of this policy,” Chalmers stated. “We’re not going to concede on this. It’s a crucial part of ensuring that the system is fairer and more sustainable.” He emphasized the importance of the policy in addressing concerns about the excessive accumulation of wealth in the superannuation system and ensuring that those with the greatest capacity to pay contribute more to the broader community.

The Coalition's push to remove unrealised gains has been framed as a defence of hardworking Australians who have diligently saved for retirement. Shadow Treasurer Angus Taylor has criticised the government's approach, arguing that it represents a “retrospective tax grab” and will discourage long-term investment.

However, the government maintains that the inclusion of unrealised gains is essential for ensuring the integrity and fairness of the tax system. They argue that it prevents individuals from artificially reducing their tax liabilities by delaying the realisation of gains. Furthermore, they highlight the significant revenue that the policy is expected to generate, which will be used to fund other important government programs.

What are Unrealised Gains?

Unrealised gains represent the difference between the current market value of an asset and its original purchase price, when that asset hasn't been sold. For example, if someone bought shares for $100,000 and they are now worth $200,000, the unrealised gain is $100,000. It's only when the shares are sold that the gain is 'realised' and becomes taxable.

The Political Landscape

The disagreement over unrealised gains adds another layer of complexity to the already contentious debate surrounding superannuation tax policy. With the government holding a slim majority in Parliament, securing passage of the legislation will require careful negotiation and potentially some compromises on other fronts. The Greens party, while generally supportive of increasing taxes on high-income earners, may also have concerns about the impact of the policy on specific groups.

The outcome of this standoff will have significant implications for the future of superannuation taxation in Australia and could shape the broader political landscape in the lead-up to the next election. The government's resolve to stand firm on this issue suggests that they are prepared to risk a protracted parliamentary battle to achieve their policy objectives.

Ultimately, the debate boils down to a fundamental question of fairness: Should those with the largest superannuation balances be taxed on profits they haven't yet realised, or should the government concede to the Coalition's demands and potentially forgo a significant source of revenue?