Treasurer Jim Chalmers has confirmed that Labor will proceed with proposed changes to the tax treatment of superannuation accounts valued at over $3 million. Despite calls from Independent MP Allegra Spender for a reevaluation, Chalmers emphasized the reforms are modest but crucial for the budget. The planned changes will see earnings on retirement balances over $3 million taxed at 30%, an increase from the current 15%.
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This new taxation rate will also apply to unrealized gains from assets like small businesses and shares in self-managed super funds. Coalition MPs are gearing up to contest Labor’s plans, echoing previous criticisms from former opposition leaders. Some within the Coalition believe this new tax would unfairly impact self-managed account holders and small business owners.
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However, Chalmers noted that the legislation, which struggled previously in parliament, will likely pass after 1 July, with support from the Greens in the Senate.
super tax changes set for 2023
While the Greens advocate lowering the tax threshold to $2 million, Chalmers has dismissed this proposal.
Addressing concerns about defined benefit schemes—which calculate retirement savings based on salary level rather than contributions—Chalmers clarified that public servants, politicians, and judges with substantial balances will be included under the new tax regulations. “These changes have been public for over two years and are necessary for budgetary considerations,” Chalmers stated. He ensured that defined benefit schemes have been appropriately factored into the legislation.
Expected to take effect from 1 July, the tax reforms are projected to generate $2.3 billion for the federal budget by 2027-28. Over the next decade, the expected revenue from these taxes is anticipated to reach $40 billion. Critics liken the proposed superannuation tax to Labor’s 2019 attempt to modify cash refunds for franking credits, which was a contentious issue during that election cycle.
Despite the controversies, Labor is steadfast in advancing the reforms as part of their broader fiscal strategy.
Image Credits: Photo by Kelly Sikkema on Unsplash
