Labor rejects ‘strange’ super tax concerns

7 March 2023

| By Charbel Kadib |

Federal Minister for Employment and Workplace Relations Tony Burke has addressed criticism of the Albanese government’s proposal to double the concessional tax rate for superannuation balances exceeding $3 million, from 15% to 30%.

The Government claimed its proposal, which would take effect from July 2025, would impact 0.5% of superannuation accounts, or roughly 80,000 Australians.

Industry stakeholders previously questioned whether the changes would have unintended consequences, beyond Labor’s projections.

The Financial Services Council (FSC) warned approximately 500,000 superannuation balances could be impacted if the concessional tax rate is not indexed — six times higher than the government’s estimates of 80,000.

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But when asked if the tax proposal could be the “thin end of the wedge”, Minister Burke said it was a “very strange argument”.

“You've had really clear ring-fencing here on this measure that the government's put forward,” he said.

Minister Burke described the proposal as a “modest change”, impacting a “tiny percentage of people”.

“The top tax bracket is 45 cents in the dollar. If you've got more than $3 million, you'll be paying 30 cents in the dollar and for everything up until that – 15 cents in the dollar,” he said.

“When the top tax bracket's 45 cents in the dollar, it's still a highly concessional rate.”

He went on to suggest Australians with multi-million-dollar superannuation accounts were using the scheme as a “broader asset management tool”.

The minister also addressed questions regarding how taxable income on unrealised returns would be calculated, including those noted by self-managed super funds (SMSFs).

In response, Minister Burke cited Treasury’s recommendation to determine taxable income by assessing annualised balance growth.

The SMSF Association warned the Treasury’s explanation of how the newly proposed concessional tax rate of 30% would be applied is a “mixed blessing”.

CEO Peter Burgess expressed concern over the proposed inclusion of all notional gains and losses as part of the calculation of an individual’s earnings for debit assessments.

“This essentially means some members will be paying tax on unrealised earnings which is highly unusual,” he warned.

Instead, Burgess noted his preference for a notional earnings calculation mirroring the model used in the excess contributions tax regime.

The Albanese government has committed to consulting with industry stakeholders before tabling the proposed reform in parliament.