Labor backdown on super tax
More than a million Australians are expected to be around $15,000 better off when they retire after Labor bowed to pressure to review controversial changes to superannuation tax.
The federal government has announced a radical redesign of its super tax policy, which initially aimed to double the tax rate on accounts containing more than $3 million to 30 percent.
Under the new changes, a 40 percent tax rate will apply to accounts over $10 million, while the $3 million threshold remains the same.
Both thresholds will now be linked to inflation, ensuring low-income Australians are not caught out by tax changes over the years as their incomes rise.
About 80,000 people have super accounts worth $3 million or more and currently pay the standard concessionary rate of 15 per cent.
Finance Minister Jim Chalmers said the reforms would make the pension system “stronger, fairer and more sustainable”.
“We always try to take feedback seriously…we’ve found another way to meet the same objectives,” he told reporters in Canberra on Monday.
The government will also increase the low-income superannuation tax offset, a payment given to low-income workers, by between $310 and $810, and eligibility for super will be extended to anyone earning over $45,000.
Changes to the tax offset will come into force from July 2027, to coincide with Labour’s next round of tax cuts, while other changes will come into force from July 2026 if passed by parliament.
The Association of Australian Superannuation Funds’ peak body said the LISTO change had the potential to add around $15,000 to low-paid workers’ retirement savings.
“These changes will make a significant difference to the retirement prospects of 1.3 million Australians,” CEO Mary Delahunty said in a statement.
Labour’s original plan to overhaul the now-abolished pension tax was roundly criticized by economists for fixing the threshold at $3 million and not indexing it for inflation.
Federal opposition also expressed concerns that “paper profits,” or unrealized gains, would be taxed.
The government has addressed both criticisms in its new plan by indexing thresholds and promising to do more to ensure unrealized gains are achieved.
However, Dr. Chalmers now needs to win either the coalition or the Greens to pass this revision through parliament.
The treasurer has discussed the super tax changes with the Greens but said on Monday he had not yet met with the opposition.
Greens senator Sarah Hanson-Young said her party would look closely at the reforms but called for more detail on how they would work and repeated the Greens’ demand for the threshold to be lowered to $2 million.
“At first glance it looks like the government has weakened on taxing the rich,” he told reporters in Canberra on Monday.
“For every rich guy who doesn’t have to pay his fair tax for retirement, someone in school isn’t getting the resources they need.”
Shadow treasurer Ted O’Brien also said he would look at the details before taking a position, but described the government’s backtracking as a “victory for the common sense coalition”.
