A political storm over tax reform has forced Prime Minister Anthony Albanese to rule out taxing capital gains on the family home as the Coalition told voters to expect more financial hits after Labor unveiled plans to raise revenue from people with superannuation balances over $3 million.
Albanese guaranteed the family home would remain exempt from capital gains tax during a day of heated claims over the super changes and whether they cleared the way for Labor to overhaul negative gearing on investment properties or scale back other tax concessions.
Treasurer Jim Chalmers started this debate by highlighting that tax concessions available to super are worth $50 billion.Credit:Alex Ellinghausen
In a key test of the new super policy, Coalition treasury spokesman Angus Taylor warned Australians that the tax increase on retirement funds with more than $3 million would extend to many more people than the 80,000 the federal government estimated on Tuesday.
But the Coalition claim is being countered by new estimates from the Grattan Institute that show it would take until 2152 before the new super fund threshold captures the top 10 per cent of people by income, suggesting the vast majority of workers and retirees would remain unscathed.
In a day of political stumbles over potential tax hikes, Albanese ruled out imposing capital gains tax on the family home after Treasurer Jim Chalmers left the door open to the idea.
“We are not going to impact the family home, full stop, exclamation mark,” Albanese said when asked on ABC Radio National whether he could rule out changing the long-standing tax exemption on the family home.
While Chalmers did not rule out the option on Wednesday morning when asked on the Seven Network to guarantee “no change ever” to the tax exemption on the family home, he clarified his position later and admitted he should have offered a definite answer.
“We have no intention of going after capital gains tax on the family home,” he said at a press conference.
“I should have done that this morning, too. What I’m trying to do is to maintain a focus on what we are doing, not on what we’re not doing.”
The prime minister and treasurer face growing questions over their long-term views on tax after the government released Treasury estimates on Monday showing the $150 billion annual cost of tax concessions on super, the family home and the use of negative gearing to allow big tax deductions on investment properties.
Opposition Leader Peter Dutton has vowed to repeal the laws to raise the tax on big superannuation savings if he wins government. Credit:Rhett Wyman
Asked if he would consider changes to negative gearing, Albanese said: “We announced exactly what we are doing yesterday.” He dismissed the question as a “speculative” issue raised by others, including independent ACT senator David Pocock.
Opposition Leader Peter Dutton warned of more tax hikes to come after Treasury issued a list of tax concessions on Tuesday that cost taxpayers $150 billion a year.
“It’s clearly the case that the treasurer has a shopping list, a hit list, and most Australian taxpayers are on that hit list,” Dutton said.
The opposition leader not only vowed to vote against the super tax hike but said he would reverse it if he won power at the next election. The argument echoed former Liberal leader Tony Abbott’s vow in 2013 to repeal the carbon tax and Kim Beazley’s promise as Labor leader in 1998 to “roll back” the GST.
“We’re absolutely dead against it, and we will repeal it,” Dutton said.
“We’re not going to stand by and watch Australians attacked. There are 88,000 that they’re talking about now. The figure of $3 million is not indexed so in 10 or 15 years’ time there will be tens of thousands, if not hundreds of thousands of Australians who will be affected by this.”
The competing claims about the 80,000 are central to an emerging dispute in parliament over whether to index the $3 million threshold, with Chalmers wanting the cap applied without indexation.
Taylor warned Australians to expect a bigger impact from the super changes because more than 80,000 would be affected, but he did not produce modelling to back his claims.
“The important point here is the Treasury included a very tricky provision in what was laid out, which is to not index the threshold,” he said.
“It’s on the government to be honest with Australians on how many people will be affected under a range of different inflation scenarios but what I can be very confident of is it is a lot more than they are saying.”
The government has been asked for modelling on the 80,000 but is yet to produce the Treasury analysis because its focus has been on costing the original policy.
Grattan Institute economic policy director Brendan Coates said it would take decades before 10 per cent of the workforce ended up having $3 million in super and would pay the tax increase.
“We project that in three decades time – that is, in 2052 – roughly the top 10 per cent of Australians will begin to retire with nominal super balances of around $3 million,” he said.
“In other words, it will take 10 federal electoral cycles before the cap starts to hit 10 per cent of people that retire in a given year.”
Coates said this cohort of the top 10 per cent by income would be earning more than $142,000 a year on average throughout their careers in order to reach the threshold by 2052.
The projections are based on the Grattan Retirement Incomes Model, which projects super balances for workers over a 37-year career, based on observed compulsory super guarantee contributions and voluntary pre-tax contribution behaviour. They do not factor in Australians making post-tax contributions to their super.
While the debate is likely to be shaped by rival estimates from different economic modellers, Jacqui Lambie Network senator Tammy Tyrrell backed the threshold without an index.
“I don’t think it should be indexed to inflation, but it shouldn’t stay at $3 million and be etched in stone forever,” she said.
“The point of $3 million is if you’ve got that much squirrelled away for your golden years, you don’t need other taxpayers passing around the collection plate for you. If things change, the number should change. I’d be open to that, for sure.”
Pocock said indexation was worth looking at, but he also said there was a case for a lower threshold such as the $2 million cap put forward by the Grattan Institute.
“In principle, I am very supportive of having a cap – I think it is very fair, and I’m still trying to work out how you can get $2 million into super,” he said.
The new policy would double the standard 15 per cent tax rate on earnings in super if the balance was more than $3 million, ensuring it would pay a 30 per cent tax rate on the earnings on amounts over that threshold.
The new rate would begin in July 2025, after the next election, in a bid to quell criticism of Albanese for breaking an election promise when he said last May he had no intention of making any super changes. It would apply to future earnings, so would not be retrospective, and would raise $2 billion a year over time.
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