Three types of Australians have a super tax problem. The bestowal of huge political power to the Labor Party following the election means that all three - farmers, small business owners and super-savers - might potentially have to look at selling their land and/or other assets to meet their newfound tax bills.

For farmers, their land is sacred. It’s often passed down generationally, sometimes across centuries. Even if it isn’t, literal blood, sweat and tears goes into producing what’s sold at the Aussie farm gate. Small business owners are in the crosshairs, as many have properties in their self-managed superfunds funds, pushing them over Chalmers’ proposed threshold for additional taxation under the proposed Super Tax.

Even if you’re a property investor who holds housing assets through your SMSF, you too are in the firing line.

In today’s SMH, Mike Foley distilled the Super Tax problem down perfectly: He explained: “Farmers could be stuck with unaffordable bills under Treasurer Jim Chalmers’ proposed tax for self-managed superannuation funds, as the agriculture sector warns that rural landowners who own valuable land would struggle to generate enough profit to pay their debts.”

This new Super Tax is set to kick off from July, with a 30% tax on a super funds’ earnings on any amount above $3 million. Could be worse than that by July, too, as the Greens - who hold a lot of votes in the Senate post-election - want that threshold down to $2 million.

While I don’t want to get into the nitty gritty of calculating how someone will be slugged, understand this: there are more than 80,000 Aussies potentially affected by this super tax. And those numbers surge if you look at who pops above the line if the amount is lowered to $2 million or more.

To be fair, however, there have been suggestions that farmers and business owners, whose self-managed super funds have their farms, factories and shops in their funds, could be forced to find money to pay this super tax when the value of their properties rise.

It should be one’s right in modern Australia to own a property that goes up in value. If it’s not our principal property, which is capital gains tax-free, we understand if we sell these other properties, then we face a capital gains tax slug. That’s completely fair.

However, the Albanese Government wants to look at the annual rise in the value of all assets inside a super fund and tax the gains in that super fund linked to the amount over $3 million.

This means that farmers with valuable and often generational land underneath them; business owners with factories and shops, as well as super-savers who have properties in boom locations, could see their super funds grow in value over the $3 million mark quickly and easily, which creates a litany of problems:

1. These people will have a bigger super tax bill each year if Australia goes through a property price rise period, which is pretty common.
2. As prices of beef, wool, and other farm goods rises, the value of farms producing them spike, which pumps up the value of the properties. As many of these are in self-managed super funds, the farmer will have to sell assets to pay the bill. Those assets could be shares in the super fund. If there aren’t other assets, generational land might have to be sold.
3. A business owner who has a property and is going through tough times where cash is short but property prices are rising, might have to sell a property or even borrow money to meet their new super tax bill.
4. Landlords, who have their properties in their super fund, could see their property’s price rise, pushing the value of their super fund over the magic number of $3 million. Then they also might have to sell shares to meet the tax bill or even sell the property itself.

While all this sounds worrying for the people who look to be affected by this new super tax, the biggest worry is that the tax will apply even when the gain to the super fund is only on paper! The so-called tax on “unrealised gains”.

Right now, you only get taxed when you pocket the gains from any sale of assets in your super fund that have increased in value. But now, property price surges, which happens in Australia, will mean a 30% tax will apply to the gains in your super fund over $3 million.

However, if the value of the property falls because of say a drought, a recession and a big jump in unemployment, or the tax office won’t give you a rebate, they will give you a credit which you can use if the property value increases in the future and a tax would have to be paid.

“Taxing something that has only paper value, and no relation to your ability to pay that tax, is flawed. Farms will be sold and generations of farming discontinued purely on this decision,” the National Farmers Federation president David Jochinke told the SMH.

The point I make strongly is that there are business owners with lifelong and family commitments to running an operation linked to a factory or shop owned by their super funds. There are also super savers or landlords who bought investment properties inside their super funds. None of these groups ever believed that unrealised gain would ever be taxed.

Foley reported that “the SMSF Association told the Economics Legislation Committee Senate inquiry that more than 17,000 super accounts hold farmland, and 3500 of those have more than $3 million”. But over time, more will be affected as land prices rise. It’s a tax with a growing base of people it will affect. Even worse, it’s a tax that isn’t currently set to be indexed to inflation, so that number will skyrocket from 80,000 pretty quickly as the years tick on.

Anyone with a property or two inside their super fund will have to watch this new tax if property prices go sky high in coming years.

While the higher tax might be understandable, the taxing of unrealised gains is unreasonable and unfair.

Our superannuation is being raided because politicians from both sides of Parliament haven’t got the guts to really fix our tax system with a higher GST and big income tax cuts.