The upcoming economic summit is poised to generate momentum for a controversial super tax plan targeting earnings above $3 million. The proposed Division 296 tax seeks to double the tax rate from 15 percent to 30 percent on superannuation balances exceeding this threshold. With the support of the Greens, who have shown a favourable stance towards the proposal, the government aims to soften resistance against the tax increase during the summit.
Originally, the legislation was expected to be discussed at next month’s productivity roundtable. However, this meeting has not yet been scheduled, leaving the timeline for the tax reform uncertain. As of Wednesday, no arrangements had been made, and with parliament set to adjourn on Thursday after two weeks of sessions, it will not reconvene until August 25, shortly after the three-day summit.
Tax Reforms on the Agenda
Tax reforms are anticipated to take centre stage at the economic summit, with various submissions already proposed. Tax experts gathered in Canberra last week for a roundtable hosted by independent MP Allegra Spender. They identified the tax treatment of trusts, capital gains, and superannuation as key areas for reform, especially if the government seeks to alleviate the burden of income taxes.
The Division 296 tax has stirred controversy due to its application to unrealised gains on illiquid assets held in self-managed super funds. Additionally, the $3 million threshold will not be indexed, potentially affecting more workers over time. The Greens have advocated for lowering this threshold to $2 million and introducing indexing, though the government has firmly rejected these requests.
A government source, who wished to remain anonymous, indicated that no definitive timeline exists for the introduction of the legislation. The source acknowledged that securing third-party support at the summit for higher wealth taxes could alleviate the political challenges surrounding the bill, particularly if it coincides with other tax increases.
Government’s Commitment to Agenda
In an effort to demonstrate its commitment to its agenda, the government has focused on significant cost-of-living measures, including waiving $16 billion in student debt and reducing the cost of medicines under the Pharmaceutical Benefits Scheme. Treasurer Jim Chalmers has stated that he has received approximately 800 submissions for the upcoming roundtable discussions.
“I’m not naive enough to pretend that we say that we’ll bring people together in the cabinet room and all of a sudden, everyone will have a unanimous view about everything,” Chalmers noted. “Let’s see what we can do by bringing people together, working out where the differences are, working out where the common ground is and trying to build consensus.”
As the summit approaches, the government’s strategy appears focused on building goodwill with voters while navigating the complexities of tax reforms. With a delicate balance between fiscal responsibility and public sentiment, the success of the proposed super tax will depend on the outcome of discussions at the summit and the degree of consensus achieved among stakeholders.
