UPDATE: Significant changes to Australia’s superannuation system have just been announced, favoring low-paid workers and introducing a “quasi-cap” on substantial tax breaks. These adjustments, proposed by Treasurer Jim Chalmers, target super accounts exceeding $3 million, imposing a new tax rate of 30 percent, while accounts over $10 million will face a steep 40 percent tax.
This urgent development is designed to create a fairer superannuation system and is set to raise $2 billion in revenue over the forward estimates, down from an earlier projected $6.2 billion due to a delay in implementation until July 2026.
Independent economists have expressed strong support for these changes. Notably, economist Chris Richardson referred to the 40 percent tax rate as a “quasi-cap” on superannuation, addressing concerns that the wealthy have exploited superannuation as a tax haven. Currently, there are 80,000 super accounts holding more than $3 million, all benefiting from the standard 15 percent concessional rate.
“Our super and housing systems have been the uncapped areas where the wealthy could benefit the most,” Richardson stated. He emphasized that low-income earners were previously facing a situation where they paid more tax on superannuation contributions than on their other income.
The revisions also include an increase in the low-income superannuation tax offset by $310, rising to $810, which Richardson insists “had to happen.” This adjustment aims to alleviate the tax burden on low-income workers, ensuring they are not penalized for contributing to their superannuation.
Economist Saul Eslake noted that while the reduced revenue from these changes is a trade-off, it is preferable to the previously proposed taxation of unrealized capital gains. “Introducing indexation means that the tax will raise less revenue over time, but so be it because that was a bad principle,” he said.
The Association of Superannuation Funds of Australia supports these proposals, asserting they are crucial for an equitable and sustainable superannuation system. CEO Mary Delahunty stated, “It’s vital that the super system is equitable and sustainable, and the changes proposed by the treasurer are important moves to achieving those goals.”
As these changes unfold, stakeholders across the nation will be closely monitoring the impact on low-income workers and the overall superannuation landscape. Stay tuned for more updates as this story develops, and share your thoughts on how these changes may affect you or your community.
