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Australians with more than $3 million in their superannuation accounts are set to face higher tax rates from 2025 under a new Labor tax plan announced this week.
Prime Minister Anthony Albanese and Treasurer Jim Chalmers announced that all super balances over $3 million would have a concessional rate of 30 per cent compared to the current standard 15 per cent rate.
The reform will take effect after the current Federal Government’s term and impact just under 80,000 people, leaving 99.9 per cent of the population unaffected.
“If Mr Dutton chooses to stand up for the individual with over $400 million in their account, and the 17 people who have over $100 million, well, that’s a matter for him, and he can make those decisions and people can look at the fiscal implications of that after the next election when we get to it,” Mr Albanese said.
The Labor government inherited $1 trillion in debt when it entered its term, and it believes this reform will help strengthen the superannuation system by making it more sustainable and feeding money back into Australian priorities.
Mr Chalmers said savings made from a reduction in these tax breaks would contribute $900 million to forward estimates and up to $2 billion over a full year.
“Beyond the next couple of years, the budget pressures are intensifying rather than easing. This is the mess that we were left and this is the mess we’re trying to clean up,” Mr Chalmers said.
The newly released Tax Expenditure Statement outlines a $50 billion loss of revenue through super tax breaks, and raising concessional rates is expected to ease pressure on the government in maintaining its federal budget.
The average superannuation balance is about around $150,000, but those with balances over $3 million hold an average of almost $6 million in their accounts.
“Most Australians would agree that that’s not what superannuation was for, it’s for people’s retirement incomes,” Mr Albanese said.
“Confronted with this information, it will be irresponsible to not take any action whatsoever. And that’s why we’ve made this decision today.”
Earnings relating to superannuation funds below $3 million will continue to be taxed at the same amount of 15 per cent, while increased concessional rates should benefit the government’s trillion-dollar debt.
The Australian Council of Social Service (ACOSS) welcomed the news of the superannuation tax reform.
“With one in eight people in Australia living in poverty and many people under financial pressure, the government is right to reduce unfair tax breaks for the wealthiest in our society,” ACOSS CEO Cassandra Goldie said.
“$3 million is far more than anyone needs to fund a decent retirement, which should be the goal of superannuation — not tax avoidance or bequests for adult children,” Dr Goldie said.
“For a fair and inclusive society, we must make the right choices about who needs more government help and who needs less. Reforming unfair super tax breaks is a good place to start.”
Superannuants with more than $3 million in their account will still be able to take advantage of capital gains tax discounts and franking credits to offset the higher tax rate.
