The federal government is launching a second attempt to reform superannuation, introducing legislation that would expand support for low-income earners while increasing tax rates for Australia’s most wealthy.
Treasurer Jim Chalmers introduced the Better Targeted Superannuation Concessions bill to parliament this morning.
If passed, the proposed laws would change the way superannuation is taxed for two groups at opposite ends of the income spectrum: around 90,000 Australians with the highest super balances and approximately 1.3 million of the nation’s lowest-paid workers.
Central to the reforms is an expansion of the low-income superannuation tax offset (LISTO).
Currently, the LISTO offsets the tax paid on superannuation contributions for individuals earning less than $37,000 per year, ensuring super remains tax-effective for those on lower incomes.
Under the proposed changes, the threshold would increase to the top of the second income tax bracket, which is currently $45,000. The move would extend eligibility to an additional 1.3 million workers.
According to the Association of Superannuation Funds of Australia (ASFA), a worker earning $44,000 annually could accumulate close to an additional $50,000 in superannuation savings by retirement as a result of the change.
“Our reforms to the low-income superannuation tax offset will help deliver a more secure retirement for more than a million Australians, mainly young people and women,” Chalmers said.
“These changes will help make the super system fairer from top to bottom.”
The bill also proposes higher tax rates on superannuation earnings for accounts exceeding $3 million.
The measure would affect the top 0.3 per cent of super account holders – about 90,000 people.
Under the proposal, earnings on balances between $3 million and $10 million would be taxed at 30 per cent, up from the current concessional rate of 15 per cent.
Earnings on balances above $10 million would be taxed at 40 per cent.
The higher rates would apply only to the portion of earnings attributable to balances above each threshold.
Combined, the measures are expected to generate approximately $1.6 billion in additional revenue annually for the federal budget.
The bill follows an earlier failed attempt to pass similar legislation during the previous parliament.
That effort faced criticism, particularly over plans to tax unrealised gains and a decision not to index the higher tax thresholds.
Those elements have been removed from the current proposal.
The revised bill applies higher taxes only to realised earnings and the $3 million and $10 million thresholds will be indexed.
Despite the changes, the legislation faces an uncertain path.
The Coalition opposes the reforms, meaning the government will require support from the Greens to secure passage in the Senate.
According to the Australian Financial Review, the Greens may seek stricter measures targeting high-balance accounts in exchange for their backing.
ASFA has urged the Greens and the opposition to support the reforms.
“Together, these changes make super tax settings fairer and more sustainable,” chief executive Mary Delahunty said.
“I encourage the parliament to pass the legislation without delay.
“Aussie workers on low incomes cannot wait another day for the fairness that this package delivers to them.”
If approved, the higher tax rates on large balances would take effect from July 1, with the expanded LISTO threshold to follow one year later.
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