From 1 July 2025, the tax on earnings on super balances over $3 million will double from 15 to 30 per cent. When he announced the changes, Treasurer Jim Chalmers said the tax hike will only impact 0.5 per cent of Australians.
The announcement is classic Labor: We’re taxing the rich. But don’t worry - that’s not you.
It is exactly this type of thinking that caused Labor to lose the 2019 Federal Election. Chris Bowen cooked up a complex stew of economic policies that included removing cash refunds for franking credits and scrapping negative gearing. Voters couldn’t stomach it.
What Labor failed to understand in 2019 and continues to get wrong in 2023 is that the majority of Australians don’t have the ‘us versus them’ unionist mentality that the ALP lives and breathes. We’re actually quite aspirational. And a $3 million nestegg is a realistic goal for far more than 0.5 per cent of us. Just ask the blue-collar cabinetmaker from Western Sydney with an industrial property in his SMSF.
The majority of those impacted will be Australians with DIY funds. The government wants to tax SMSFs on unrealised gains, which means some poor punter could be hit with a huge tax bill if a dead cat happens to bounce at the wrong time.
In an open letter to the Treasurer, SMSF auditor and former EY executive director Naz Randeria said the proposed changes “strike a dagger into the very heart of the Australian superannuation system” and undermine the notion that you can put long-term plans in place to benefit your retirement.
“All those who have played by the current superannuation rules and been encouraged by various contribution measures to boost their super balance during their working lives are now finding that the goal posts have shifted,” she wrote.
“I would argue that within the next four decades, having a retirement nest egg of more than $3 million will be considered ‘modest’ given the current rise in our cost of living, and more people will easily breach this hard cap.”
Creating wealth is a great Australian pastime. We love it. Two thirds of us own a home and one in five has an investment property.
There were more than 1.25 million active online traders in Australia in 2021, according to Investment Trends, of which 435,000 placed their first trade on a share market in the 2020 calendar year. We are clearly interested in finding ways and means of improving our lot.
Not to mention the younger generations with no memory of life before the internet, raised on social media and following finfluencers. Almost half (49 per cent) of first-time investors in 2020 were aged between 25 and 39, while 18 per cent were under 25 years old. What happens when this cohort starts seriously building their nestegg?
We aren’t necessarily resentful towards those with $3 million or even $100 million super balances. In fact, some of us are pleased to know the sky’s the limit. Others just want to know that we can retire comfortably without the government stepping in and changing the game.
Most people desire stability. They want something they can depend on. Superannuation is a system built on trust and Australians need to believe that their balance will be adequate to comfortably cover their retirement. And if it doesn’t, they need to know that the aged pension will be available to carry them through.
The issue with doubling the tax rate for super balances over $3 million is about the principle. It sets a precedent for future meddling in our financial affairs.
Crucially though, by telling 99.5 per cent of Aussies that this won’t impact them, the Labor government is telling us what we’re worth. Worse still, they are making the assumption that we’ll never be worth more than $3 million.
That’s a hard pill to swallow for those of us who bought the dream.
