AFR: Government considers changes to controversial super tax

by Phillip Coorey, AFR's Political editor, Sep 4, 2025 – 7.16pm

The Albanese government has hit pause on its plans to impose an extra 15 per cent tax on earnings of superannuation balances above $3 million as it contemplates changes to the controversial proposal.

Three separate sources, all speaking on condition of anonymity, have told The Australian Financial Review that while no final decision has been made, internal discussions have been held in recent weeks as the prime minister’s office takes an increased interest in the policy.

Anthony Albanese and Jim Chalmers in parliament this week. During the election campaign, Albanese cited aspiration when he ruled out touching negative gearing if elected.  Alex Ellinghausen

At the same time, former prime minister Paul Keating, a known critic of the proposal on the basis that the $3 million threshold is not indexed, and that the tax will apply to unrealised gains, has been lobbying Anthony Albanese behind the scenes and, to a lesser extent, Treasurer Jim Chalmers.

It is understood that the internal discussions centre on addressing both those criticisms, which have been echoed widely by other opponents of the proposed tax.

Although the government intends to proceed with the measure in some form, even possibly as part of a broader reform, one source said the motivation to consider changes was based on sensitivities about the message that the bill, in its original shape, would send in terms of voter aspiration.

There were also fears it could precipitate a scare campaign similar to that around Labor’s franking credits policy that hurt the party at the 2019 election.

The Greens, whose vote is needed to secure the passage of the legislation through the Senate, are favourably disposed towards the measure but want the $3 million threshold lowered to $2 million and indexed.

Greens yet to be contacted

As parliament rose on Thursday for a four-week break, the government had yet to contact the minor party to begin negotiations.

The proposed division 296 tax would start from July 1 this year and apply an extra 15 per cent tax on earnings on the component of a super fund above $3 million. It would also apply to unrealised gains on illiquid assets held in self-managed funds such as farms and businesses.

Announced in February 2023, it was budgeted to raise $2.3 billion in its first full year of operation. That number was forecast to climb steadily due to the refusal to index the $3 million threshold.

Chalmers, who is under pressure to balance the budget, argued that just 80,000 people would be initially affected and that the measure was about equity, in that some people were exploiting the super system by using it to accumulate vast asset wealth.

Keating has urged at a minimum that the $3 million be indexed.  Louie Douvis

The government was unable to secure the passage of the legislation through the Senate last term because it was opposed by everyone in the upper house except the Greens.

Since the election, in which Labor boosted its Senate numbers, it needs only the support of the Greens to pass the legislation. But so far, its focus has been on legislating “friendlier” measures that it took to the election, such as waiving $16 billion in student debt, lowering the cost of prescription medicines and enshrining penalty rates in law.

This is central to Albanese’s strategy of emphasising delivery in a bid to generate voter goodwill for more contentious measures, which would either be implemented later this term or taken to the next election.

Chalmers has said the government has a clear mandate to legislate the division 296 tax this term, given the policy stayed on the books and was taken to the May 3 election.

“We’re not changing policies we took to the election; we’ve got a mandate for that change,” he said in July, a month before the Economic Reform Roundtable, where intergenerational inequality in the tax system was highlighted.

Chalmers has previously ruled out scrapping the tax and absorbing it into a broader hit on wealth taxes emanating from the summit.

One Labor source said that while relatively few people would be initially affected, there was a lingering sensitivity that the decision not to index the $3 million and its application to unrealised gains could be weaponised for a broader scare campaign.

Keating has urged at a minimum that the $3 million be indexed, arguing that the refusal to do so effectively introduced bracket creep into the super system.

On Wednesday, AustralianSuper chief executive officer Paul Schroder was ambivalent about the tax as originally proposed.

“If you look at the $3 million proposition, it’s kind of logical that very high-income earners and very large account balances could be taxed differently,” he said.

He also said his fund would adapt to the taxation of unrealised gains if need be.

“It’s up to the government and the parliament to set the rules, and we’ll do whatever the government and the parliament sets,” he said.

During the election campaign, Albanese cited aspiration when he ruled out touching negative gearing if elected.

Although Labor took a negative gearing policy to the 2016 and 2019 elections, Albanese said it was now off limits, and not just because he was unconvinced it would help boost housing supply.

“The Labor Party can’t send a message that is anti-aspiration. We have to be pro-aspiration,” he said.

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Source: https://www.afr.com/politics/federal/government-considers-changes-to-controversial-super-tax-20250903-p5mrz4

[4th September 2025]

AFR: Keating warns on Labor’s $3m super tax

John Kehoe, Phillip Coorey and Hannah Wootton, Aug 24, 2024 – 5.00am

Former prime minister Paul Keating has warned Labor’s plan to double the tax on retirement savings over $3 million could turn superannuation into a low- and middle-income pension scheme and damage community confidence in the $3.9 trillion savings system he created.

In private talks over the past month, Mr Keating has told industry super executives and union leaders that the government’s refusal to index the $3 million threshold to increases in inflation is “unconscionable”, according to people familiar with the discussions who spoke on the condition of anonymity.

Paul Keating.  Louie Douvis

Mr Keating’s opposition is another blow for Treasurer Jim Chalmers, whose superannuation reforms are designed to raise at least $2.3 billion a year to repair the federal budget and pay for higher spending on the National Disability Insurance Scheme, defence and other government priorities.

The super tax changes already face opposition from the Coalition and some crossbench MPs and senators. A mooted extra tax on the value of unrealised gains has faced intense opposition. Unrealised gains are valuation increases of assets, such as shares and property, before the assets are sold and converted to cash.

Unless the government makes concessions, the changes seem unlikely to pass parliament before an election due by May next year.

Under the proposal, an Australian who has more than $3 million in superannuation would be liable for an additional 15 per cent tax on earnings for super balances above the dollar threshold.

The new tax would be in addition to the existing 15 per cent tax on super earnings, taking the total headline tax rate up to 30 per cent.

Strongest frustration

Industry super funds, such as AustralianSuper and Hostplus, and the Australian Council of Trade Unions, have invited Mr Keating to discuss his views on the tax changes over the past month, sources familiar with the talks said.

Although Mr Keating suggested to industry leaders that any new tax should not apply to retirement savings of less than $5 million, his strongest frustration appeared to be the non-indexation of the $3 million tax trigger point, the sources said.

In private conversations with a wide circle of people, Mr Keating suggested that an unindexed limit on tax concessional superannuation would condemn super to becoming a low- to middle-income scheme, completely at odds with the universal scheme he introduced with the superannuation guarantee in 1992.

That is, superannuation would lose its universality, which Mr Keating apparently regards as key to its strength, national appeal and longevity – the same qualities that have underpinned Medicare.

If higher earners and the Liberals were to lose confidence in compulsory super because of the new taxes, they could abandon political support for compulsory super, in turn hurting the nest eggs of lower-income workers.

The failure to annually increase the nominal $3 million trigger point for the new tax means that by about 2040, the amount people can have in low-taxed super will fall in real, inflation-adjusted terms to today’s tax-free retirement cap of $1.9 million.

The government says that, initially, only 0.5 per cent of people with superannuation accounts will be affected.

But this number will rise significantly as more people run into the unindexed $3 million trigger point due to future inflation.

The Financial Services Council estimates that more than 500,000 current taxpayers will be adversely impacted during their lifetime, including 204,000 Australians under the age of 30.

“Leaving the cap stuck at $3 million will mean that in today’s dollars a 30-year-old will have a real cap of around $1 million, calling into question the intergenerational fairness of an unindexed cap,” FSC chief executive Blake Briggs said.

“Caps in the superannuation system are indexed to ensure generational fairness, so that each generation gets the same outcomes and benefits from the superannuation system.”

Industry super funds and Mr Keating are worried the new tax could cause the $3.9 trillion super pool to shrink over the long term, as the mooted additional 15 per cent tax deters higher income earners from saving in super, industry sources say.

The private thoughts of Mr Keating will be perceived as a blow to the superannuation tax ambitions of Dr Chalmers, who wrote his PhD thesis on Mr Keating’s prime ministership.

Former Liberal treasurer Scott Morrison introduced in 2016 a $1.6 million limit for super to be rolled into a tax-free retirement account. The tax-free limit is indexed to inflation each year and has since risen to $1.9 million.

Earnings above this amount in retirement are already liable for a 15 per cent headline tax, less any capital gains discounts or franking credits.

Superannuation organisations want the non-indexation of the new proposed $3 million threshold to be reviewed, to protect the real value of people’s retirement savings.

Regular review

The Australian Retirement Trust, which manages $300 billion and has significant sway within the industry fund movement and Canberra, supported indexing the threshold.

“Like many other taxes, there should be some form of regular review mechanism or indexation in place to ensure the policy remains aligned into the future,” a fund spokesman said.

Super Members Council, which is the lobby group for industry funds, said it backed the tax changes, but the cap needed regular reviewing.

“Some tax caps in super are indexed, others are not – that’s a matter for government,” general manager of strategy Matt Linden said.

“But government should periodically review caps and their relationships to each other to ensure their policy objectives are being met.”

The Association of Superannuation Funds of Australia, also called for a review of indexation and the threshold itself within two years of the tax change taking effect.

ASFA chief executive Mary Delahunty also wanted regular reviews at defined intervals to ensure the tax stayed targeted at its intended demographic of wealthy individuals who are already set up for a comfortable retirement and likely to pass on significant wealth.

But she said the current debate around indexation was “a side issue” that risked delaying the legislation.

“For now, ASFA’s view is that reviews will allow data-driven decision-making on the tax that considers the consequences of the threshold in a broad socioeconomic context,” she said.

“This could change if the [first] review shows indexation is a more reliable approach.

“But that is not a question that needs to be settled now, and it certainly shouldn’t hold up the passage of this crucial legislation.”

An Aware Super spokesman said his fund “does not have a view” on indexing the cap though, as the tax change was “not a concern to a significant number” of its members.

Eight independent MPs last week teamed up to oppose the government’s plan to tax unrealised gains on superannuation above $3 million.

Six teal MPs, plus two other so-called community independent MPs, are concerned about the detrimental impact of taxing unrealised gains of farmers who own property in their self-managed super fund, small business operators, start-ups and defined benefit pensions for public servants and judges.

Key crossbench senators whose support will be required to pass the law, including David Pocock and Jacqui Lambie, also object to the attempted taxation of paper profits inside super funds.

Mr Keating declined to comment when contacted on Friday.

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Source: https://www.afr.com/policy/tax-and-super/keating-warns-on-labor-s-3m-super-tax-20240823-p5k4r5

I'm with you @Solvetheriddle. I don't have $3M in super, but I aim to at some stage and will be happy to pay what is still less tax than if I had $3M under my own name. We as a country can't just rely on income tax to fund everything. And the line that because it isn't indexed means it'll effect 1.2 million people in 30 years shows the person saying that is either deliberately deceptive, or really stupid. It's obvious that any second term government that wants a sugar hit in the polls will move the threshold, just like they do with the income tax brackets.

But I also take exception to the tax break argument against super. Yes, the tax breaks now exceed the old age pension payments, but imagine what our economy would look like if every retiree just had the old age pension to spend! Having extra to spend is good for the economy and good for the retiree.

Which leads to my last point, spending. Super is meant to be spent, by the person who accrued it. It shouldn't be used as a deliberate wealth transfer system to the next generation. If they happen to get some because you die early, or had a bit leftover, great. But to set the whole thing up with wealth transfer as the main objective really annoys me.

Okay, that's my rant. The soapbox is free now for anyone who wishes to avail themselves of it!

Taxing unrealised gains is in the same ilk as land tax. Which replaced stamp duty. Pay as you go rather than a larger sum later on. And prevents your children losing a large sum as the alternative tax, I believe.

I'm also super keen on finding ways to lower house prices, so my kids have a chance of owning a home. I'm a person with a $2m valued home and I'd be quite happy for the tide to lower all boats.

Just watched a piece on ch 7 saying (breaking news!) The $3m super threshold additional tax will hit many more people than the government's stated 80,000. .......it says now it will hit 1.2m superannuants ........in 30 years time. I mean c'mon, really, is this the level of concern?

Just saying .........