Federal Treasurer Jim Chalmers announces massive changes to superannuation

Treasurer Jim Chalmers has announced changes to the federal government’s proposed taxes on superannuation.

Chalmers revealed on Monday that the Labor cabinet had agreed on reworking the scheme which would see individuals with more than $3 million in super being taxed.

The treasurer said the government was prepared to change the proposal “in order to get it through parliament”.

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“These are sensible changes which take more than two years of feedback into account,” Chalmers said.

“We have worked through the issues and found another way to deliver on the same objective.

Included in the changes is the $3 million threshold — incurring a 30 per cent tax rate — now being indexed, meaning fewer Australians will be caught in the bracket in the future.

A new $10 million threshold — also indexed — will also be implemented, with those in the new bracket receiving a 40 per cent tax rate.

“This is still a concessional tax arraignment but it’s better targeted,” Chalmers said.

“It will still only impact less than half a per cent of Australians … this means about 90,000 Australians next year will have more than $3 million in their super, and less than 8000 will have more than $10 million.

Chalmers also said tax increases will no longer apply to unrealised capital gains, while a tax offset for workers earning up to $45,000 would be increased from $500 to $810.

The change will lead to about $15,000 more in superannuation at the time of retirement for some 3.1 million Australians.

He added that the reworked plan would raise less than the original proposal but relieve financial stress on low-income workers while adding “better targeted concessions for the biggest balances”.

“This will make the superannuation system fairer from top to bottom.”

All changes except those to low-income earners are expected to be introduced from July next year to allow for the government to engage with consultation and feedback.

Chalmers added the government is continuing to work on making sure defined benefit schemes are counted and calculating realised capital gains both prior to and after the scheme is introduced.

Former prime minister Paul Keating threw his support behind the reworked scheme, taking aim at changes made to superannuation by John Howard and Peter Costello in 2007.

“The government and Treasurer Chalmers have spent well over a year seeking to divine a method whereby the Howard/Costello runaway scheme could, with all reasonableness, be brought under control by setting new permissible limits and above which taxation applied at a higher rate,” he said in a statement, The Guardian reports.

“The Treasurer’s success in working through and resolving this impasse will now mean that superannuation accumulations will be successfully taxed but taxed only on a basis of realisation, but more than that, taxed at a new limit and at a higher rate, restoring much needed equity following the Howard/Costello rampage of 2007.

“Importantly, these decisions solidify superannuation tax arrangements in a manner the community can now rely upon for the long-term security of their retirement savings and with it, their peace of mind.”