UPDATE: In a major shift, the Australian federal government has just announced a significant overhaul of its superannuation tax policy, ensuring that over 1 million Australians will be approximately $15,000 better off by retirement. The Labor Party has responded to mounting pressure and backlash by abandoning its original plan to double tax rates on super accounts over $3 million from 15% to 30%.
Under the new reforms, announced in Canberra on Monday, the $3 million threshold remains intact. However, accounts exceeding $10 million will now incur a 40% tax rate. Importantly, both thresholds will be indexed to inflation, protecting lower-income Australians from being unfairly taxed as incomes rise.
“We always try to take feedback seriously… we found another way to satisfy the same objectives,” said Treasurer Jim Chalmers during a press briefing. This move is expected to directly impact around 80,000 people currently holding super accounts over the $3 million mark.
Additionally, the government will enhance the low-income superannuation tax offset by $310, bringing it to $810. This change will expand eligibility to anyone earning above $45,000. These adjustments are set to take effect from July 2026, with the tax offset changes implemented by July 2027, coinciding with Labor’s next round of tax cuts.
The Association of Superannuation Funds of Australia has praised the reforms, stating they could significantly improve retirement savings for low-paid workers. CEO Mary Delahunty remarked that, “These changes will make a material difference to the retirement prospects of 1.3 million Australians.”
The initial proposal faced widespread criticism from economists and opposition parties, particularly for locking the threshold at $3 million without inflation adjustments, which could have unfairly burdened lower-income earners. The revised plan addresses these concerns, yet Chalmers must now negotiate with either the Coalition or the Greens to gain parliamentary approval.
Greens senator Sarah Hanson-Young expressed skepticism, stating her party will scrutinize the reforms closely, while also advocating for a lower threshold of $2 million. “For every rich dude who doesn’t have to pay his fair tax on superannuation, someone at a school is not getting the resources they need,” she noted.
Shadow treasurer Ted O’Brien acknowledged the government’s revisions as a “victory for the coalition of common sense,” indicating a potential shift in the political landscape surrounding superannuation tax policies.
As the situation develops, all eyes are on the Parliament where these crucial reforms will be debated. The urgency of the matter underscores its importance for millions of Australians planning for their financial futures. Stay tuned for further updates as the negotiations unfold and the details of the reforms are finalized.
