Labor’s $3 Million Super Threshold Could Affect Over 500,000 Australians: Liberal Senator

A Liberal senator has warned that Labor’s planned taxes on high superannuation balances could eventually impact over 500,000 Australians—a number impacting six times more individuals than what the government has claimed.

Premier Anthony Albanese announced this week his plan for doubling taxes on super-accounts with over $3 million (US$2.03million). The tax increases will be effective from mid-2025 at the same time as Australia’s next federal elections.

Treasurer Jim Chalmers, however, has stated that he doesn’t plan on indexing the cap at $3 million.

Labor described it this way: “modest” and necessary change to support the government’s spending, which is estimated to increase Australia’s debt to $36.9 billion (US$24.97 billion), or 1.5 percent of the nation’s GDP in 2022-23. For some gaps in the budget, the tax proposal could raise $2B.

According to the government, the current tax changes will only impact the richest 0.5 percent (or 80,000) of Australians.

Andrew Bragg (Liberal Senator) stated that, in the event that the tax threshold was not indexed by retirement age then it would be illegal. “over half a million people will be hit by this creeping tax.”

“Raising taxes is the last thing they should be doing and I just think it sends the wrong message to people that the government will pull the rug from underneath you,” He told Sky News April 5.

“If the change was going to go ahead, it would be better if it was indexed.”

What will the new tax actually impact?

Indexation allows the cap of $3 million to be adjusted over time for inflation, costs of living or input prices.

According to modelling released by the Financial Services Council on March 3, an unindexed $3 million cap at maturation would affect the superannuation savings of 204,000 Australians under the age of 30 and 322,071 people aged over 30 by the time they reach retirement age assuming 2.5 percent inflation per year.

A 25-year old IT worker earning $100,000 per year would surpass the $3,000,000 cap if their super balance was $35,000 – even if they kept making minimum super payments.

The super cap translated for a 25-year-old today—meaning that their super would be worth $3 million in 40 years without any additional contributions—would be $919,671, assuming an inflation rate of 3 percent. Labor’s tax proposal would not affect a 25-year old with $624 867 in super at 4 percent inflation.