Anthony Albanese‘s government is now reconsidering its radical plan to target Australians with more than $3million in super out of concern it could be an unfair slug on younger generations.
Labor was re-elected in a landslide despite having a plan to impose a new 15 per cent tax on high super balances, now affecting the top 0.5 per cent of retirement savers or about 80,000 people.
This tax would be on top of the existing 15 per cent earnings tax during the accumulation or working phase of super – effectively doubling taxes to 30 per cent for the wealthiest retirement savers.
There has been outcry over Treasurer Jim Chalmers’ insistence that the tax won’t be indexed for inflation – meaning that it will capture a bigger slice of average-income Australians who hit the magic $3million in super by retirement age in coming decades.
The tax would also apply on savers’ unrealised gains – or changes in the paper value of their superannuation assets – in a radical departure from the usual practice of taxing assets when they are sold.
The policy was initially floated in 2023 – two years before the last election – but three government sources have told The Australian Financial Review the Prime Minister’s office is now examining how to change the policy and address the criticisms about indexation and unrealised gains.
There are ‘internal discussions’ underway about how to do so, the AFR reported, but no final decision has been made.
Anthony Albanese’s government is now reconsidering its plan to target Australians with more than $3million in super in the name of intergenerational fairness
Shadow treasurer Ted O’Brien said it appeared the Prime Minister was overruling Treasurer Jim Chalmers.
‘Reports today indicate that Labor is walking away from its super big, super bad super tax after the Prime Minister has been forced to pull rank on his Treasurer,’ he said.
‘Labor’s unfair tax on unrealised capital gains would see Australians taxed on money they never received, crosses a red line in tax law and sets a dangerous precedent.
‘This whole saga shows a Treasurer addicted to spending and secret taxes, and a Prime Minister who is forever playing catch up. When Labor run out of money, they always come after yours.’
Retired pollster Martin O’Shannessy, who previously ran Newspoll, said Australians concerned about the government’s superannuation policy would be unlikely to be Labor voters.
‘It’s my opinion that those people aren’t voting Labor,’ he told the Daily Mail on Friday.
‘The people who are being hit by that tax are certainly not already voting Labor and therefore I don’t think they’d be subtracting from the current Labor primary vote.’
As recently as Sunday, Chalmers argued Labor’s tax policies were about helping young people, and insisted the government would proceed with its controversial Division 296 proposal.
As recently as Sunday, Treasurer Jim Chalmers argued Labor’s tax policies were about helping young people, and insisted the government would proceed with its controversial Division 296 proposal (he is pictured with wife Laura)
‘More broadly, intergenerational equity has been a motivation for so much of what we’re already doing in tax,’ he told ABC Insiders on Sunday.
The Albanese Government had planned for the tax to start on July 1, 2025 but legislation to introduce it is yet to pass the Senate. The Greens have the sole balance of power in the chamber.
The super tax measure was designed to raise $2.3billion a year in revenue, with the biggest losers considered Australians with self-managed super funds (SMSFs).
If enacted now, the policy would hardly hurt the young in the short-term, with new tax office data showing 85 per cent of Australians with a self-managed super fund were 45 or older.
Self-managed super funds can have up to six members, with the tax data showing the average SMSF member having assets worth $881,000.
Australia’s superannuation assets were worth $4.3trillion in the June quarter and self-managed super funds were worth $1.05trillion – or a quarter of the total retirement pool.
Since 2007, Australians over 60 have been exempt from paying tax on their super earnings.
Chalmers has suggested Labor had no plans to re-introduce a super tax during the retirement phase of super.
He noted that the previous Coalition government in 2017 had introduced a $1.6milllion transfer balance cap someone could transfer into the retirement phase of super. This indexed cap rose to $2million on July 1.
‘Another change was made I think about 10 years subsequent to that by the Morrison Government, or perhaps Scott Morrison as Treasurer, which was the transfer balance cap, which dealt with some of those issues that Treasurer Costello had introduced into the system,’ he said.
Chalmers just five days ago was adamant no change would be made to its plan to tax unrealised gains on super balances above $3million.
‘I think people have been pretty clear, the change that we are proposing to superannuation, we haven’t changed our policy on that,’ he said.
The Coalition is opposed to taxing unrealised gains on super.
The Greens have no such qualms but want the threshold reduced to $2million, with indexation for inflation.
