Treasurer Jim Chalmers today unveiled a watered-down superannuation tax scheme after facing tough criticism from pensioners and tax experts. The Australian government will back down on taxing unrealized gains, index the AUD 3 million threshold, increase the rates on earnings for super balances between AUD 3 million and AUD 10 million to 30%, and those of super balances above AUD 10 million to 40%.

Chalmers also disclosed that the government will increase the low-income superannuation tax offset from AUD 500 to AUD 810, and the eligibility threshold from AUD 37,000 to AUD 45,000. He added that the initial proposal would have left the threshold unchanged, raising concerns that the tax would ultimately capture a larger number of people in the long run. 

The Treasurer emphasized that the government aims to ensure equality by applying the tax to defined benefit pensions from July 2026. He believes the net effect of these changes on the budget is a loss of approximately AUD 4.2 billion over the next four years, largely due to the one-year delay in the rollout. 

Chalmers says changes make the super system fairer

The Treasurer on Monday claimed that he and his government always try to take feedback seriously, continually seeking the best way through any crisis. He claimed that the proposed changes will make the superannuation system fairer from top to bottom, adding that his government has just found an alternative to satisfy the same goals. 

However, Greens Senator Sarah Hanson-Young pointed out that the proposed changes looked like the government was going weak on taxing the wealthy. She stressed that letting the wealthy off the hook was not the kind of superannuation reforms the Greens want to see.

Shadow Treasurer Ted O’Brien also criticized the government’s backdown, calling it an absolute embarrassment. O’Brien also believes it is unfair how Prime Minister Anthony Albanese jetted out, leaving the treasurer to take all the public humiliation. Meanwhile, he still felt that Chalmers should explain the revenue hole in the federal budget despite acknowledging that the government had made the right decision. 

Treasurer Jim Chalmers confirmed that revamping the superannuation tax system was a joint effort with Prime Minister Albanese, adding that the government was looking to make at least six major changes to the legislation by July 1, 2026. Chalmers said the changes will make the legislation more targeted to ensure a stronger and sustainable pension system, which he also believes will be a better deal for low-income earners.

Keating welcomes proposed tax backdown

Former Prime Minister Paul Keating welcomed the changes, praising Treasurer Chalmers for successfully working through the impasse and restoring much-needed equity. He claimed that the superannuation accumulations will now be taxed on the basis of realized gains, and at a new, higher limit.

Keating said the decision to rework the superannuation system will solidify future related tax arrangements in a way that Australians will rely upon for the long-term security of their retirement savings. However, Chalmers emphasized that these changes are difficult, although they are expected to raise billions of Australian dollars.

“This is difficult tax reform … I don’t accept the characterization that this is simple, or easy or uncontested.” 

–Jim Chalmers, Treasurer of the Australian Government 

Albanese also weighed in on the matter, saying that it is not unusual for his government to receive feedback suggesting difficult reforms. The prime minister clarified there are no major changes to policy this time, pointing out that his request to the treasury to rework the contentious tax proposal was also nothing out of the ordinary. 

Chamlers estimates that the change will impact about 80,000 wealthy Australians, which could be adjusted in the future to account for different factors affecting each super tax bracket. He also pointed out that the new thresholds will be tied to inflation, adding that the Treasury is exploring more options to address concerns around the revamped super tax proposal.

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