Pay up: Treasurer to apply taxation super soaker to the rich

Superannuation balances above $3 million will be taxed at a higher rate as the Albanese government looks for opportunities to improve the budget bottom line.

Feb 28, 2023, updated Feb 28, 2023
Treasurer Jim Chalmers. (AAP Image/Lukas Coch)

Treasurer Jim Chalmers. (AAP Image/Lukas Coch)

The changes won’t come in for another two years and will apply to about 80,000 people with super balances above $3 million in their accounts.

Starting from 2025/26 – probably after the next federal election – the concessional tax rate applied to future earnings for balances above $3 million will be 30 per cent.

“The modest adjustment we announce today means 99.5 per cent of Australians with superannuation accounts will continue to receive the same generous tax breaks, and the 0.5 per cent of people with balances above $3 million will receive less generous tax breaks,” Treasurer Jim Chalmers said.

Any changes will require legislation passing parliament.

The adjustment is expected to generate $2 billion in the first full year and $3.2 billion over five years.

“It’s prospective on future earnings, not retrospective, and doesn’t come in for more than two years,” Dr Chalmers told reporters on Tuesday.

The announcement follows a week of fierce debate about the sustainability and fairness of super tax breaks.

Treasury analysis released on Tuesday shows the tax breaks are collectively worth up to $50 billion a year and largely flow to high-income earners.

Chalmers said the revenue would not be redirected into another purpose, but used to improve the structural position of the budget.

“And every dollar that’s spent on a tax break for people with tens of millions of dollars in super is a borrowed dollar that makes the deficit bigger,” he said.

Asked if Australians could be certain no  changes were coming to super that would affect more than the top 0.5 per cent of super balances, Prime Minister Anthony Albanese said it was clear the government was focused on high balances.

“It’s hard to argue that those levels are about actual retirement incomes, which is what superannuation was for,” he told reporters in Canberra.

The government said super tax concessions were the priority, despite the burden posed by other tax concessions and exemptions, such as negative gearing and capital gains tax discounts.

“The 10 biggest tax expenditures are worth more than $150 billion annually – around a third of the top 10 is made up of superannuation tax discounts,” Chalmers said.

The Treasury analysis of tax expenditures shows concessional treatment of super contributions will cost about $25.3 billion in uncollected revenue in 2022/23.

In 2019/20, 30 per cent of the benefit went to people who were among the top 10 per cent of income-earners.

Men attracted an average benefit of $1950, compared with the $1390 average benefit for women.

Tax breaks on super earnings similarly advantage wealthier individuals more, and tend to benefit men more than women.

Greens leader Adam Bandt said he would discuss the changes with Labor, but the “modest proposal” ignored other more responsible budget policies.

“Let’s look at reining in the stage three tax cuts … that’s the kind of change that will make a difference to people, not winding back super tax cuts on one hand, only to give the very same people a $9000 a year tax cut,” he said.

Liberal deputy leader Sussan Ley said it was yet another broken election promise by Labor, following those on energy prices, housing costs and workplace relations.

“The prime minister is reneging on promises he made … before the election and legislating commitments he didn’t even mention once,” she said.

Council on the Ageing chief Patricia Sparrow said making the changes after the next election, but flagging them now, would give people time to assess their impact.

Tony Negline, from Chartered Accountants ANZ, said the shift would have a big impact on a small number of people who had played by the rules.

“Investing in superannuation in this country is like trying to shoot a moving target flying in circles over shifting goal posts,” he said.


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