Opinion by David Jochinke, National Farmers' Federation President
Forty years ago today (July 1), 45,000 farmers packed their station wagons, fixed a few cheese sandwiches and sarsaparillas for the road, and headed for Canberra for a fair go.
The caucus was protesting proposed taxes (in particular, capital gains and fringe benefits taxes) and high interest rates.
The rally was led by the National Farmers Federation president Ian McLachlan, and attended, perhaps bravely, by the Prime Minister Bob Hawke.
It remains the largest rural rally in Australian history.
On a logistical level, it's amazing to think of the coordination required to organise a national feat on that scale, before being so readily connected by the internet and mobile phones.
Imagine telling your 1985 self about the phone in your pocket that also serves as a computer and camera.
Rally attendee Bob Lawrence reflected on the 'carnival-like' event recently.
He pointed out that farmers are still firmly price-takers, not price-makers.
"Nothing has changed since then, and farmers basically get what's leftover, after all the middlemen and women and organisations have had their cut," Mr Lawrence said.
"It [still] costs more to buy a packet of cornflakes in Bourke than it does in Sydney."
Today, farmers face another battle in the form of the proposed Super Tax, a change that risks unravelling the foundations of how family farms are passed from one generation to the next.
The NFF and its members have been vocal in its opposition to the Super Tax, a change that will see once inconceivable notion of taxing "unrealised gains" on assets held in superannuation.
Unrealised gains refer to increases in asset value that haven't been converted into cash.
Structuring farm assets in a self-managed super fund (SMSF) is a legitimate way to facilitate farm succession.
A SMSF is a subset of superannuation – a type of trust set up to fund the retirement of its members.
Thousands of family farms have placed their land into super to lease back to the next generation.
It's one of the options on the table to allow farmers to retire, while giving the next generation a shot at running the business. This tax threatens to unravel that model.
However, if these assets rise in value above the $3 million threshold the government is proposing – a realistic scenario when you are talking property – the fund holders will be up for a tax bill on these "unrealised gains" even though they don't translate to income unless the asset is sold.
Treasurer Jim Chalmers mischaracterises this as "a very modest change", but it would in fact radically reshape our tax system and potentially devastate thousands of family farms.
The evidence against this proposal is irrefutable.
When superannuation architect Paul Keating himself raises concerns about taxing unrealised gains and the absence of threshold indexation, it signals a serious policy flaw.
Coincidentally, Keating was the Treasurer at the time of the 1985 rally. This isn't partisan politics, it's economic commonsense backed by compelling data.
University of Adelaide research reveals the stark reality: nearly 50,000 SMSF members would face immediate impact, with average additional tax liabilities exceeding $80,000.
More concerning is that 13.5 per cent of affected members would experience significant liquidity stress – unable to meet tax obligations without selling assets.
For agriculture, these aren't abstract numbers but existential threats.
The taxation of unrealised gains may force many farmers to sell land assets simply to pay their tax bill.
These aren't wealthy individuals hoarding hundreds of millions – they're hardworking Australians who've built farms to pass on to their children and grandchildren.
If the Bill goes ahead, 3500 farming families will be hit immediately. Another 14,000 are in the firing line if land values creep above the threshold.
And let's be clear – every one of Australia's 80,000 farmers could be next if this becomes a broader tax on unrealised gains. That should alarm anyone who believes in stable, principled tax policy.
This policy creates a troubling precedent by overturning nearly 40 years of tax practice separating earnings and capital gains tax.
When an extraordinarily broad coalition including farmers, small business organisations and financial experts unanimously warn against a proposal, prudent governance demands reconsideration.
The Treasurer's suggestion that someone else will eventually index the threshold offers cold comfort to the 3500 farmers facing immediate hardship.
It's also possible a future Treasurer would use this precedent to expand taxation of unrealised capital gains.
And it is concerning that to get the Bill through the Senate, the Treasurer will likely need to rely on the Greens, who'd like to further lower the threshold to $2 million.
The NFF isn't opposing reasonable reform of superannuation concessions.
But taxing unrealised gains represents a dangerous departure from established tax principles with far-reaching consequences beyond the targeted "half a per cent".
The Treasurer looks to build a reputation as a credible economic manager. Now is the moment to demonstrate true economic leadership by revisiting this flawed policy and working with stakeholders to develop a more measured approach that achieves revenue goals without forcing family farms to the auction block.
While farmers aren't packing sandwiches and sarsaparilla for another trip to the big smoke, let's be clear: The Super Tax will hurt family farms.
We support fair reform and it's not too late to find a better way forward.
First published in Farm Weekly.
