How Albanese overruled Chalmers on controversial Labor policy
Albanese’s move to ask Chalmers to overhaul the proposal, confirmed by two senior Labor sources and a well-placed MP, comes during another period of speculation about the pair’s relationship. The scope of the productivity roundtable was narrowed by Albanese’s decision that tax changes would not be considered, even as Chalmers tried to open the door to big ideas.
Sources confirmed that Chalmers, who sees himself as a reformer and intellectual leader in the government, was initially reluctant to give up the super policy he had been advocating for two years. One of the sources said Chalmers had heard no negative feedback about the policy from anyone in the cabinet other than Albanese, adding weight to the widespread view that Albanese was a cautious prime minister.
Treasurer’s treasury… Jim Chalmers with his former boss Wayne Swan and his political idol Paul Keating.Credit: Oscar Coleman
Chalmers defended the super policy against criticism for months, as super funds argued it would be difficult to disclose profits on paper and farmers voiced concerns about paying taxes on illiquid assets.
On Tuesday, Chalmers said he and Keating, his political idol, had had “half a dozen” conversations about politics in the past week.
“I take my responsibilities as the custodian of Paul’s creation very seriously, and that means making significant changes, making significant reforms to ensure our pension system is as strong, fair and sustainable as possible,” Chalmers said.
The coalition jumped on the news on Tuesday to claim Chalmers’ authority was crumbling.
Shadow treasurer Ted O’Brien said: “One of Jim Chalmers’ big ideas was to start taxing unrealized gains in people’s super accounts, but even this remains a wreck after he was forced into a humiliating backpedal by the prime minister.”
The rejig will cost the budget 4.2 billion dollars in four years, one of the reasons for this is that it will be postponed until next year. But even when operational, the new package will generate less revenue than original estimates: $1.6 billion in 2028-29 instead of $2.5 billion.
There are growing concerns in the Undersecretariat of Treasury about the dependence of the budget on personal income tax and the application of preferential tax on retirement.
The budget’s dependence on employment income was a key factor in the Treasury’s proposed tax on unrealized capital gains in large super accounts; This offer has now been removed.
Loading
Analysis released by UBS on Tuesday found that household wealth increased by 7.7 percent, or $1.3 trillion, to $18.1 trillion. Much of this wealth is tied to housing and retirement income.
It is feared that unless the tax base is broadened, particularly on assets, working people and young Australians face a growing income tax hit.
Chalmers’ plan to introduce a $10 million threshold at which super account winnings would face a 40 per cent tax rate was introduced earlier this year as a way of targeting people with huge super balances.
Tax data shows there are 30 people with retirement funds of more than $100 million, for an average of $209.3 million per person.
Australian National University tax expert Bob Breunig said some people with seven-figure super balances may turn to trusts as a result of the new $10 million threshold.
Loading
“You will pay 30 percent tax on gains on balances between $3 million and $10 million; [still] “It continues to be a preferred investment tool as it is well below the 47 percent marginal income tax rate,” he said.
“A trust is essentially about holding an investment and having the gains from that taxed at a lower rate, but it’s generally less privileged than a pension – unless you’re someone with a pension of more than $10 million paying 40 per cent tax, which is probably worth doing something about.”
