Australians with more than $3 million (US$2.02 million) stowed away in their pension funds (superannuation) could see tax increases on money over that benchmark under Labor’s new policy announced on Feb. 28.
Prime Minister Anthony Albanese and Treasurer Jim Chalmers say their proposal would affect 0.5 percent of the population—around 80,000 individuals—while 99.5 percent of Australians would be unaffected.
The policy, which if passed would start from 2025-26, effectively doubles the tax rate for superannuation holders from the normal 15 percent to 30 percent.
The move is estimated to generate $2 billion of extra revenue for the government.
“We’ve got persistent and growing spending pressures in health, the [National Disability Insurance Scheme], aged care, and of course defence as well,” he added.
“In the near-term in the Budget, we’re doing pretty well, from a combination of higher commodity prices, low unemployment, and the beginnings of stronger wages growth. But beyond the next couple of years, the budget pressures are intensifying rather than easing.”
Chalmers also said the Labor government did not “begrudge anyone who has made a lot of money” or taken advantage of the tax breaks superannuation accounts offer.
“We want to make that clear. If you’ve done well in super, that’s a good thing.”
Prime Minister Albanese said that starting the new policy on July 1, 2025, meant the policy would only apply to future earnings.
“Australians who are having to make tough decisions around the kitchen table expect their government to be prepared to make tough decisions around the Cabinet table,” he said.
Australian Super is Australians’ Money: Shadow Treasurer
Shadow Treasurer Angus Taylor said the government was walking away from an election promise not to add new taxes to superannuation.“Now, this was an unambiguous commitment from the prime minister. He said he wouldn’t raise taxes on Australian super. Australian super is Australians’ money. That must be the starting point here,” he told reporters in response to the government’s announcement on Feb. 28 in a press conference.
The Economists’ View
Cameron Murray, a research fellow at the Henry Halloran Trust at the University of Sydney, said the new policy made sense if the purpose of compulsory superannuation in Australia was to build the retirement nest egg of workers.“Once your super balance is past $3 million, the social benchmark should be your retirement is settled, so there shouldn’t be ongoing tax advantages for extra money on top of that,” he told The Epoch Times.
He added, however, that it was strange to continue compelling high-income workers—especially those in their 50s—to continue paying money into their super funds if the government discouraged individuals from using it to lower their payable tax.
“Why are you making it compulsory if you don’t want them to have any more money in there?” he said.
Meanwhile, John Humphreys, an economist at the Australian Taxpayers’ Alliance, said he was concerned the government was seeing Australian retirement funds as a potential source of income for the government.
“This is a small dip in the ocean,” he told The Epoch Times.
“But it’s a worrying sign that they increasingly think that if they need to raise more money or balance the budget—instead of taking the difficult responsible decisions of tightening their belts and spending less money—they [believe they] can take small bite after small bite out of super funds.”
He also noted that Treasury’s estimate that the government could raise $2 billion from the policy was misguided.
“We know it’s simply wrong not to factor in behavioural changes. So when you go after people with enough money to hire tax accountants and lawyers, they don’t simply take-no-action,” he said.
“They tend to ask their accountants to please re-arrange their finances to make sure they don’t pay too much tax. So, this probably isn’t going to raise as much revenue as the government hopes, and it is going to spook a lot of people that the government sees super as their personal plaything.”
