Treasurer Jim Chalmers has revealed the federal government’s planned change to superannuation tax on balances above $3 million will eventually affect one in 10 people – but it will take three decades to reach that point.
Answering a question from shadow treasurer Angus Taylor in parliament on Monday, Chalmers confirmed the decision not to index the threshold to inflation would drive up the number of people caught by the change over time.
Treasurer Jim Chalmers says it will take 30 years before planned super reforms affect one in 10 people.Credit:Rhett Wyman
The government is planning to raise the concessional tax rate on super earnings from 15 per cent to 30 per cent on balances above $3 million. The proposal is expected to raise more than $2 billion a year in its first year of operation.
Announcing the plan last week, Chalmers said when the scheme started in mid-2025, fewer than 80,000 people, or 0.5 per cent of the population, would be affected.
He said on Monday that by the start of the 2030s, the reform was expected to catch 1 per cent.
Treasury analysis showed that the change would affect 10 per cent of people after 30 years.
Chalmers said the analysis showed the proposed changes, which the Coalition is opposing, would affect only a small number of people.
“What we are proposing … is a modest change but it is a simple choice,” he said.
“We inherited $1 trillion of Liberal Party debt and deficits as far as the eye can see, and unfunded ongoing commitments and intensifying pressures in the budget, [and] we say that the generous concessions in superannuation for half a per cent of people can be a little bit less generous.”
Pressed by Opposition Leader Peter Dutton on what advice he would give a 37-year-old about how their superannuation would be affected by the government’s proposals, Prime Minister Anthony Albanese said the Coalition’s own changes to super and personal income tax had not been indexed to inflation.
Albanese said: “I make this bold prediction – in 30 years’ time, some people will be earning more than they are today in dollar terms, and some people will be paying different income tax rates in 30 years than they are now.”
Taylor accused the government of breaking a commitment to voters not to change superannuation.
“The government has not only broken its superannuation promise to Australians, it’s also been deliberately tricky and misleading about how many people will be hit by their superannuation tax,” he said.
“Labor has shown yet again that it cannot be trusted and that the prime minister’s word means nothing.”
The government’s changes will extend to people who rely on defined benefits schemes for their retirement income, including public servants, federal MPs elected to parliament before 2004 and the federal judiciary.
Finance Minister Katy Gallagher said the government would take industry advice on how to bring defined benefit schemes within the planned reforms.
She said one area of discussion would be taxing a defined benefit scheme’s income stream the same as the equivalent earnings on a $3 million accumulation fund. From July 1, people aged between 65 and 74 have to draw down at least 5 per cent of their fund, which equates to an income of $150,000 a year. The drawdown rate increases with age.
Another discussion point would be how defined benefits schemes were valued relative to the $3 million threshold for accumulation funds.
Gallagher said this was the same as changes introduced by the Coalition in 2016 around a threshold known as division 293 for concessional tax treatment on super. The threshold was cut to $250,000 from $300,000.
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