Cameron Upton, a 22-year-old university student in Canberra, has been working since he was 16. He has just $4,000.92 in his superannuation account. Upton believes there is little chance his account will ever reach $3 million.
This is the threshold above which Labor plans to double the tax rate on earnings to 30%. “That is so dramatically unobtainable for a large swath of the population that they shouldn’t even be worrying about it,” Upton says. “It is important that we do think about the risk, but I feel like this is so far-flung in the reaches of great wealth.
I basically know no one who would be affected.”
Labor’s proposal has sparked debate. Some argue that the younger generation will end up paying a heavier tax burden. AMP economist Diana Mousina estimates that by the 2060s, about one-third of the population could have super balances over $3 million.
Phy Mei Liu, a 27-year-old from Melbourne, has more than double the typical super balance for her age group. She believes that those in the $3 million-plus bracket should welcome the chance to pay more tax. “I would actually be very glad to pay that tax, because I know that it’s funding solutions,” Liu says.
She highlights government spending priorities such as health, education, and climate change. “It’s a privilege to pay tax in a country like Australia.”
Liu, who works in gender equality research, notes that superannuation was never meant to be a tax haven. However, it has been used as such by wealthier individuals.
young Australians discuss super tax plan
Grattan Institute analysis supports this view, noting that “tax-free retirement earnings turn super into a tax shelter,” particularly for high earners who contribute from their wages to superannuation at a lower tax rate. Labor’s proposal would affect roughly 80,000 people, representing the top 0.5% of super balances.
Despite this, favorable tax conditions would still be available to those avoiding the 45% income tax rate. A survey found that 18- to 34-year-olds supported the tax changes nearly as much as older Australians did. This was the case even though a higher percentage of younger respondents believed they might accrue a $3 million balance.
Luke, a 22-year-old software engineer from Sydney, already has about $20,000 in super. He isn’t worried about potentially paying more tax. “If it does affect us, we’re going to be in a really good position anyway,” he says.
Critics argue that younger generations will face the biggest tax burden as wages and super balances inflate. However, Brendan Coates, an economic policy director at Grattan Institute, dismisses these claims. He states that the vast majority of those affected in the next decade will be older and wealthier.
Coates adds that indexing the fixed $3 million threshold upwards could limit the number of workers affected by the tax. Treasurer Jim Chalmers anticipates that future governments will increase the new tax threshold. The tax is projected to raise $2.3 billion in 2027-28, contributing to the federal government’s annual revenue of approximately $700 billion.
Liu sees the tax as a “first step” toward a more equitable playing field for young workers. “We’re finally rebalancing the scales a little bit and closing that intergenerational gap across wealth,” she says.
