NFF leads ag lobby into battle against 'dysfunctional' $3m super tax

The farm lobby wants the proposed 15 per cent additional tax on super balances which exceed $3 million to exclude agricultural land assets when the policy is locked into May's federal budget.

Significant numbers of family farming businesses hold farmland in self managed superannuation trusts as part of their long term farm succession strategies.

Many now face the prospect of having to sell that land because they cannot afford a likely doubling of their annual super tax bill.

Although the Labor Government estimated its new annual tax on the unrealised value of personal and self managed superannuation balances above $3m would only impact about 80,000 high wealth individuals, farmer groups and rural accounting firms suspect at least 30pc to 40pc of farmers have their land - or part of it - in a superannuation fund, which leases the property back to the producer.

The NFF has told Treasurer, Jim Chalmers and government finance officials, taxing unrealised gains from rising agricultural land valuations would leave many producers struggling to pay their tax bill because production returns from the land itself were generally modest - typically about two per cent.

Many farmers' super funds were cash poor, and therefore may have to sell their land to generate liquid assets or avoid the tax, subsequently undermining family succession plans set in train years ago.

NFF chief executive officer, Tony Mahar, said the government had clearly not considered the agricultural impact in detail, or the acute and disproportionate consequences set to befall many farm businesses.

"We're always very concerned about the implications of any government policy which may undermine succession planning, including changes to family trust structures, or talk of death duties," he said.

The government's decision to not index its $3m cap also meant, over time, more and more farmers would be caught in the annual double whammy tax trap because of rising land valuations.

NSW Farmers president, Xavier Martin, said the concept of having to pay a tax bill for unfunded earnings based on an estimated land valuation rise was "absurd and impractical".

"It's unconscionable. And you won't even get a refund if your super fund's anticipated earnings turn negative," he said.

Mr Martin has heard numerous first hand concerns from members at meetings around the state in the past month.

He said already primary producers were rethinking their property and water asset acquisition plans, even though the new tax rules were not due to apply until mid-2025.

"People are quite rightly asking why they should bid up at an auction if Albo is going to make them pay an extra tax bill on their assets in a few years," he said.

"They are hesitating about buying intentions, and their succession planning.

"Potentially the farm is going to be lost to the next generation.

"This tax plan is completely dysfunctional to the nature of family farming".

Mr Martin noted many concerned farmers he spoke with were not high wealth individuals, or living in prosperous farming districts, yet much of the state had seen land valuations jump 20pc in the past two years.

Those producers were now pondering if they could withdraw at least some of their farmland from their superannuation fund; whether subdivision for sale would be possible, or, if they could even afford to borrow the significant sums needed to repurchase their land.

"I'm not sure how many are likely to be impacted in NSW, but I think it's many hundreds, if not thousands," he said.

"Some pockets of the state appear to have more farmland owned by self managed super funds than others."

Meanwhile, Mr Mahar said the consequences of the $3m superannuation ceiling, including the government's determination to tax unrealised gains, would be a hot topic at this week's NFF council meeting in Canberra, which draws state affiliate organisations from across Australia.

The NFF council meeting would also look at options for cranking up farm sector lobbying efforts in Parliament House.

"There are not many farms worth less than $3m these days," he said.

"We are not arguing with the government's concept of finding revenue opportunities to deal with the deficit, but rather, the way this will unreasonably capture legitimate agricultural business operations."

Fortunately farm businesses, for various reasons, had a range of structure options, which potentially provided some alternative tax effective choices, some of which may be helpful in planning for the 2025 tax changes.

"We are getting some mixed readings from accountants on the likely extent of the implications of the tax, particularly if farm businesses don't have all their land assets owned by their super fund, but we're still not comfortable about the government's approach."