Superannuation Tax Bill Introduced

Treasurer Jim Chalmers has introduced a revised bill to parliament to increase taxes on high superannuation balances. This marks his second attempt to modify super fund earnings taxation, with the support of the Greens party remaining crucial for Senate passage.

The revised bill aims to increase taxes on high superannuation balances, and its passage through the Senate hinges on the support of the Greens party.

Key Revisions to the Proposal

The initial proposal aimed to double the tax on super fund earnings above $3 million from 15 per cent to 30 per cent. Criticisms included the lack of indexing for the $3 million threshold and the taxation of "unrealised" gains. The new bill addresses these concerns with several key changes:

The $3 million threshold for a 30 per cent tax rate will now be indexed.
A new threshold of $10 million has been added, above which a 40 per cent tax rate will apply.
Provisions for taxing unrealised gains have been modified based on industry feedback.
The government also committed to increasing top-up contributions for low-income earners.

Political Landscape and Greens' Stance

The Coalition has expressed outright opposition to the tax. The Greens' votes are therefore essential for the bill to pass the Senate.

Economics spokesperson Nick McKim stated that the Greens have not finalized their position but indicated a pathway for a "constructive approach" following the bill's introduction. The Greens are considering alternative proposals, including a 45 per cent tax rate on balances exceeding $10 million, aligning with the top income tax rate.

Implementation for Super Funds

Addressing concerns about taxing unrealised gains, the new bill outlines a workaround for large super funds.

These funds will identify high-balance individuals annually and apply the additional tax based on the entire year's earnings. Funds will have flexibility to adapt this to their systems, guided by government principles requiring a "fair and reasonable" approach. Smaller funds, such as self-managed super funds, will have specific guidelines to determine the portion of assets belonging to each member for tax purposes, taxing only realized gains.

Low-Income Support and Industry Reaction

The low-income superannuation tax offset will increase to a maximum of $810, up from $500, and will be available to individuals with taxable incomes below $45,000, up from $37,000. This $45,000 threshold will be linked to future changes in the second income tax bracket.

The superannuation industry peak body, ASFA, welcomed the changes, with chief executive Mary Delahunty stating that they would make the system "fairer and more sustainable."

Effective Dates

If passed, the new superannuation tax rates would take effect on July 1 of the current year. The changes to the low-income superannuation tax offset would become effective on July 1, 2027.