Albanese government announces huge changes to controversial superannuation tax: What you need to know
Treasurer Jim Chalmers has unveiled a major overhaul of Labor’s controversial superannuation tax plan, after fierce backlash over fears it would punish ordinary Australians with growing nest eggs.
Caving to criticism from retirees, Chalmers announced the Albanese government’s tax on super balances of more than $3million will be indexed to inflation, and will no longer hit unrealised gains – or gains purely on paper.
However, in an escalation of the controversial policy, super balances above $10million will be slugged at a higher, 40 per cent rate. Balances between $3million and $10million will still be taxed at the 30 per cent.
People with less than $3million would still keep paying the normal 15 per cent rate.
Previously, the $3million limit wasn’t tied to inflation, so as wages and prices increased over time, more Australians would have been pushed over that threshold and forced to pay the higher tax.
‘We have always had in our back pocket indexation, or an indexation like this, in order to get it through parliament,’ Chalmers said.
‘For earnings on super balances between $3 and $10m, the rate remains 30 per cent,’ he said.
| PROPOSAL | BEFORE | AFTER |
|---|---|---|
| Thresholds | 30 per cent over $3m | 30 per cent $3m-$10m40 per cent above $10m |
| Unrealised gains | Taxed | No tax |
| Low-income offset | $310 | $810 |
‘The rate for over $10m becomes 40 per cent. So this is still a concessional tax arrangement, but it’s better targeted.
The government has also dropped plans to tax unrealised capital gains – a move that had sparked widespread backlash from accountants and retirees.
Unrealised gains are increases in the paper worth of assets that haven’t yet been sold.
So in this case, should a person’s super savings go up on paper, that increased value was classified as an unrealised gain which would be taxed.
Treasurer Jim Chalmers has reworked the federal government’s controversial plan to increase taxes on large superannuation balances, following months of criticism.
Dr Chalmers said the changes would make the super system fairer.
‘As treasurer and as a government we always try to take feedback seriously,’ he told reporters in Canberra on Monday.
‘We always try to find the best way through.
‘We found another way to satisfy the same objectives.
‘It means a fairer superannuation system from top to bottom.’
The government will also increase the low-income super tax offset payment from $500 to $810.
While Labor had floated changes to super taxes two years ago, the proposed legislation has never been introduced into federal parliament due to opposition from the coalition and the Greens.
