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Treasurer Jim Chalmers will double the tax rates paid by Australians with superannuation account balances worth more than $3 million, in a move he says is about budget sustainability and equity.
Key points:
- The super tax break changes will not take effect until after the next election
- They will see the tax on earnings increase from 15 to 30 per cent on accounts with more than $3 million
- The treasurer says the decision is about making superannuation more sustainable
There has been an escalating war of words between Labor and the Coalition in the past week as the treasurer has continued what he is calling a national conversation on tax breaks paid to fewer than 0.5 per cent of superannuation accounts.
"Currently, earnings from superannuation in the accumulation phase are taxed at a concessional rate of up to 15 per cent," he said in statement.
"This will continue for all superannuation accounts with balances below $3 million.
"From 2025-26, the concessional tax rate applied to future earnings for balances above $3 million will be 30 per cent.
"This is expected to apply to around 80,000 people, and they will continue to benefit from more generous tax breaks on earnings from the $3 million below the threshold."
On this time line, the measure would take effect after the next federal election.
Change to net budget $2 billion a year
Government figures released earlier today showed tax breaks on super cost the budget about $51 billion in forgone revenue.
Currently, the government charges 15 per cent tax on superannuation fund earnings, but only while you are still working and contributing money into it, known as the accumulation phase.
The increase to a tax rate of 30 per cent will apply to accounts with $3 million or more during the accumulation phase.
Superannuation earnings on funds with a balance of up to $1.7 million are tax-free in the retirement phase, and this will remain unchanged.
Amounts above the $1.7 million cap are treated as being in the accumulation phase, and taxed at 15 per cent.
The government's proposal does not change the amount your super is taxed when it is contributed by your employer or by you before tax.
Mr Chalmers said on its current trajectory, the forgone revenue would cost the budget more than the aged care pension within 30 years.
Prime Minister Anthony Albanese said the change would net the government about $2 billion a year.
In the past week, Labor has faced accusations of breaking election commitments, having pledged before the election that it had no plans to change superannuation.
The Coalition vowed it would oppose changes to superannuation tax breaks.
That prompted a rebuke from Liberal backbencher Russel Broadbent, who on Monday told the ABC that the Coalition should consider the policy if it would help with budget repair.
But he was adamant the government needed to take the policy to the public instead of just legislating it.
He said he supported a public debate on changes to superannuation taxes to help repair a budget in structural deficit.
"If they are fair and equitable and just — I will repeat that: fair, equitable, and just — I think we should take on board what the government is offering on our behalf," Mr Broadbent said.
But Shadow Treasurer Angus Taylor, speaking after Labor's announcement, insisted the Coalition was "not going to be part of it".
He accused Labor of breaking its election commitment, but when asked if a future Coalition government would repeal the change, gave no indication that would happen.
"Australians don't want to see election promises broken," he told reporters.
"And they don't want to see a government that can't manage its own spending and has to come after Australians with higher taxes."
Super account with $400 million
Fewer than 1 per cent of superannuation accounts have more than $3 million. Of those accounts, the average balance is close to $6 million.
Mr Chalmers said the average account had about $150,000 and would be unaffected by the changes.
In announcing the change, Mr Chalmers highlighted one superannuation account which had $400 million in it. He said 17 people had accounts with more than $100 million.
"We don't begrudge anyone who has made a lot of money or saved a lot of money or takes advantage of the tax breaks that are legitimately available to them," he said.
"If you have done well in super, that's a good thing."
Mr Chalmers said he had no plans to index the $3 million threshold for the higher tax rates.
But he said Treasury officials would consult with stakeholders on that ahead of the May budget.
"My intention is not to index it because we need to make superannuation more sustainable over time," he said.