Controversial super tax will now be indexed, capital gains tax idea scrapped
Labor Treasurer Jim Chalmers has made numerous significant concessions to the government's plan to increase taxes on large superannuation balances.
Under the controversial proposals, Labor intends to double the existing 15% tax on super balances above $3 million to 30%.
While this change is still expected to go ahead, the threshold will now be indexed to inflation. Indexing the threshold marks a significant shift, ensuring that the changes won’t gradually capture more Australians through bracket creep over time.
Furthermore, Chalmers has agreed to scrap the contentious and somewhat confusing decision to apply an unrealised capital gains tax on super balances, including any property held in an SMSF.
Reports that the government was mulling a backflip on its super tax plans first emerged in early September.
A new $10 million tier will also be introduced, where earnings will be taxed at 40%. The government estimates about 90,000 individuals will be affected by the $3 million threshold and just 8,000 by the $10m tier.
The initial implementation date has also been booted back to July 2026.
“The original model was the best option identified at the time, but we have taken the decision to adjust the model to recognise the views we have heard since then,” Chalmers announced on Monday.
“With these changes we are continuing to deliver on our longstanding commitment to better target superannuation concessions that we took to the last election,” he added.
Chalmers also announced a boost to the low‑income superannuation tax offset (LISTO) by $310 to $810 while raising the eligibility threshold from $37,000 to $45,000. This is expected to take effect from 1 July 2027.
Chalmers had been under pressure from The Greens – whose support is needed to get the bill through parliament – to index the tax. The Greens also wanted the threshold reduced to $2 million.
Chalmers’ tax walk back was welcomed by former Prime Minister and super architect Paul Keating.
“The Treasurer’s success in working through and resolving this impasse will now mean that superannuation accumulations will be successfully taxed but taxed only on a basis of realisation, but more than that, taxed at a new limit and at a higher rate, restoring much needed equity following the Howard/Costello rampage of 2007,” Keating said.
Teal MP and vocal opponent of super tax reform Allegra Spender also welcomed the changes.
“My community has been clear that they support reducing concessions on high-value superannuation balances, but do not support the taxation of unrealised gains, both on principle but also for its unintended consequences,” said Spender.
