Individuals with superannuation balances surpassing $3 million will see their tax rate double to 30 per cent from 2025-26, Treasurer Jim Chalmers said on Tuesday.
Currently, earnings from superannuation in the accumulation phase are taxed at a concessional rate of up to 15 per cent, with the Treasurer confirming in a statement that this will continue for all super accounts with balances below $3 million.
"The modest adjustment we announce today means 99.5 per cent of Australians with superannuation accounts will continue to receive the same generous tax breaks, and the 0.5 per cent of people with balances above $3 million will receive less generous tax breaks," the Treasurer said.
"From 2025-26, the concessional tax rate applied to future earnings for balances above $3 million will be 30 per cent,” Dr Chalmers continued.
"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."
The Treasurer added that the 2022‑23 Tax Expenditures and Insights Statement released on Tuesday shows that the revenue foregone from superannuation tax concessions amounts to about $50 billion a year, with the cost of these concessions projected to exceed the cost of the Age Pension by 2050.
"This modest adjustment to tax breaks for the biggest accounts is expected to generate revenue of about $2 billion in its first full year of revenue after the election," the Treasurer said.
"This modest adjustment is consistent with the government’s proposed objective of superannuation, to deliver income for a dignified retirement in an equitable and sustainable way."
The government is set to introduce enabling legislation to implement this adjustment "as soon as practicable". Further consultation are expected to be undertaken with the superannuation industry and other relevant stakeholders to settle the implementation of the measure.
The latest move comes just over a week since the government released a consultation paper seeking feedback about the benefits, phrasing and implementation of an objective for super.
Dr Chalmers had declared that Labor wanted to “end the super wars once and for all” and vowed to make sure that future changes to the super system were compatible with its objective.
Later, in an address to the SMSF Association National Conference, the Treasurer argued that it was imperative to establish a consensus on superannuation policy.
“With consensus comes certainty and I think that is what the sector wants more than anything. Because with consensus, the driver can change, but the destination doesn’t,” he said.
“Which allows you to do what you do best – maximising retirement incomes. That’s how an objective of super makes a practical difference.”
But hints that the government was moving towards capping super tax breaks proved to be divisive, with the Opposition vocalising its intent to block any potential changes.
“If you’ve got kids at the moment who are talking to their grandparents who are on the cusp of retirement, or indeed their parents, then they’re going to be saying, ‘well, hang on, why would I invest into superannuation if the rules keep changing and the taxes keep increasing, and every time Labor gets into government they run out of money and they start increasing the taxes on superannuation to plug the gap?’,” Opposition Leader Peter Dutton told the Today Show last week.
“If you create that uncertainty, then people won’t invest, and the whole idea of superannuation is that it provides for people’s retirement so that they can lead a dignified retirement, and, in the end, it’s their money. I mean, they’re the ones that have worked for it and contributed. They want the maximum return so that they can enjoy a good retirement.”
Additionally, despite going on record in May last year to say that Labor had “no intention” of making “any” changes to super, the PM insisted that the party had actually promised to refrain from “big changes” as part of its pre-election bid.