Australian Government Eyes Wealthy Retirees as It Considers Super Tax Concession Cuts

Australian dollars are shown in Sydney, Australian, on March 10, 2015. Dominic Lorrimer/Getty Images

The Australian centre-left Labor government is considering cutting superannuation tax concessions for Australians with high retirement savings as it looks for avenues to improve the budget’s bottom line.

Speaking at The Australian Financial Review Super & Wealth Summit on Nov. 8, Financial Services Minister Stephen Jones said the federal government would bring up a debate about tax concessions after it legislated an objective for the superannuation system.

“We’re starting from the proposition about what is right, not what is a fight,” he said, as reported by the Australian Financial Review.

While noting that tax concessions on super funds reduced federal tax revenue and were used to amass wealth, the minister said the government had not determined how much superannuation was too much.

“I'd start from the proposition that you’re really going to struggle to convince the government that a retirement savings balance of $100 million (US$65 million) is all about retirement savings,” he said.

Jones also mentioned that there were 32 self-managed super funds in Australia with more than $100 million in assets and that the largest one was worth over $400 million.

“I celebrate success, but the concessional taxation of funds like these has a real cost to the budget, which needs to be considered,” he said.

Financial Services Minister Stephen Jones at a press conference in Canberra, Australia, on Oct. 31, 2022. AAP Image/Mick Tsikas

In Australia, concessional taxation of super exists to encourage people to save for their retirement rather than rely on the age pension, which is a burden to government finances.

Under current laws, Australians who retire with over $1.7 million in super can put the excess funds in their accumulation account.

These funds will attract a concessional tax rate of 15 percent on earnings and contributions, which is much lower than the top marginal income tax rate of 45 percent.

Industry’s Response to Super Tax Concession Cuts

Some groups in the super industry have supported the idea of imposing a limit, such as $5 million, on people’s super balances.

AustralianSuper CEO Paul Schroder said a person having $5 million in their super account could make $325,000 a year if the annual return on the investment were 6.5 percent.

“We’ve got plenty of multimillion-dollar members in the fund, so to each of them, I apologise for what I’m about to say, but readjusting the tax mix would be beneficial for society,” Schroder said, reported the Australian Financial Review.

Some super experts even went further and suggested the Labor government cap super balances at $2 million.

Meanwhile, H&R Block tax expert Mark Chapman said it was unfair for the government to continue to tinker with superannuation.

“People have been paying into their super for decades under one set of rules, and it’s reasonable to assume those rules will still apply when you get to super age,” he said in comments obtained by AAP.

Nevertheless, Chapman said a $5 million super limit was reasonable to help repair the federal budget, given the rising government debt.

Opposition financial services spokesman Stuart Robert has not replied to a request for comments from The Epoch Times.