Staggering blow for Anthony Albanese’s superannuation tax as union sounds the alarm over issue

Anthony Albanese’s plan to tax Aussies with more than $3million in super has come under fire from the head of Australia’s trade union movement.

Labor wants to impose a new 15 per cent tax on the unrealised gains, or paper value, of retirement savings above this threshold before assets in a self-managed super fund are sold.

This would double the headline rate to 30 per cent when the new tax for those with particularly big super balances was added to an existing 15 per cent tax on earnings during the accumulation phase of super. 

The government argues only 0.5 per cent of Australians, or 80,000 people have more than $3million in super and says a future government can index it for inflation.

But Australian Council of Trade Unions secretary Sally McManus said the policy needed to be indexed now to avoid trapping future workers as their super balances increased in coming decades.

‘Over time, I do think it’s got to be indexed because you’ve got to make sure eventually people don’t end up there,’ she told Nine’s Today program on Tuesday.

‘But that’s a very long time in the future. You’ve got to have $3million in super in a self-managed fund to be affected by it.’ 

Ms McManus has joined former Labor prime minister Paul Keating and a former ACTU chief Bill Kelty in criticising the Albanese Government’s Better Targeted Superannuation Concessions bill.

Ms McManus argued an 18-year-old tradie would need to be earning $300,000 a year to build up a $3million super balance by retirement, when asked about Keating and Kelty’s comments on the super tax plan.

‘It does need to be indexed though so I do support what they’re saying about that,’ she said.

‘It will take a long time for your average tradie to be getting $3million when they retire.’

But new analysis shows even average-income young workers now would be affected in four decades’ time. 

Wilson Asset Management has done new modelling showing this failure to index the new tax would affect 5.4million Australians, aged 18 to 34, by the time they turned 67 and were able to qualify for the age pension.

‘All age cohorts under the age of 35 would be captured by the taxation on unrealised gains by retirement,’ it said.

The modelling showed Labor’s new tax on super balances above $3million, known as tax Division 296, would even affect young Aussies with a zero super balance now. 

‘Our modelling indicates those aged 27 and under with a zero starting superannuation balance would exceed the unindexed cap before retirement,’ it said.

‘This has led to some characterising it as a “stealth tax”, one that fundamentally alters the long-term investment incentives within superannuation.’

A 19-year-old worker on a $54,088 salary, with zero super, would have $3.491million in retirement savings by 2071.

Someone who is 20 now on a $66,768 salary and just $75,000 in super now would $5.197million in superannuation by 2072.

Australians who studied longer before starting work would also be affected, with a 27-year-old worker with zero super, on a $90,315 salary now, like to have $3.098million in super by 2065.

A typical income earner, now 34, with $180,000 in super would $3.5million in super by 2058.

Keating, whose government introduced compulsory super in 1992, was also scathing of Labor’ plan to tax the unrealised gains on super balances above $3million arguing ‘every young person joining the workforce this year’ would be affected.

With Labor and union luminaries slamming the proposed super tax, Albanese declined to comment.

‘I’m not commenting on various things that you tell me other people have said,’ he told Sky News.

Mr Kelty, who served as ACTU secretary from 1983 to 2000, described the idea of taxing unrealised gains on super as ‘bad policy’.

‘I don’t mind taxing people but not unrealised earnings,’ he told The Australian last month.

AMP deputy chief economist Diana Mousina argued the average 22-year-old worker would be affected in four decades’ time. 

Labor has the numbers with the Greens in the Senate to legislate its proposed super tax, designed to raise $2.3billion a year in revenue, with the law backdated to July 1 when Parliament resumes later this month. The Greens want a lower $2million threshold but indexed for inflation.