October 14, 2025 • 19 mins
It was the superannuation tax plan that helped Labor achieve a landslide victory in the last election. Though some of Australia’s wealthiest Australians - who were hit hardest by the plan - cried foul, the government has been saying, for more than two years, that it would NOT change its super proposals.
Flash forward to this week, when, in an embarrassing political backflip, treasurer Jim Chalmers announced, yep, major changes to it.
Today, senior economics correspondent Shane Wright on what these changes are, and how you’ll be impacted by them.
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Episode Transcript
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S1 (00:01):
From the newsrooms of the Sydney Morning Herald and The Age.
This is the morning edition. I'm Samantha Sellinger Morris. It's Wednesday,
October 15th. It was the superannuation tax plan that helped
labor achieve a landslide victory in the last election. Though
some of Australia's wealthiest Australians, who were hit hardest by
(00:25):
the plan, cried foul. The government has been saying for
more than two years that it would not change its
super proposals. Flash forward to this week when, in an
embarrassing political backflip, Treasurer Jim Chalmers announced yep, major changes
to it. Today, senior economics correspondent Shane Wright on what
(00:45):
these changes are and how you'll be impacted by them. So, Shane,
you have just written that our treasurer's changes to his
superannuation tax plan amount to a spin so outrageous that
even Shane Warne would have struggled to match it. That's
pretty damning, and we're going to get into that. But
(01:07):
just first off, can you briefly remind us what was
Jim Chalmers initial superannuation tax plan that he announced in 2023?
S2 (01:15):
Yeah. So let's go back to the 2023 budget. Happier
days for treasurers back then even though inflation was on
the rampage. But at that time, he said, look, we
have to do something about superannuation concessions, which Treasury estimates
this year are going to cost everybody $55 billion in
(01:35):
foregone taxation. Let's put that to one side. But that's
what's really at the heart of this issue. And he
comes up with this idea, right. We're going to hit
increase the tax on people who have accounts with more
than $3 million in them. We are talking a small
number of people right at the moment, like we're talking
50 to 70,000 in a country of 27 million. So
(02:00):
that's the perspective. But it was what he came up with.
That was the big issue. Apart from increasing the tax
rate by 15 percentage points. So he effectively doubled it.
It was right. We're going to start taxing what are
called unrealized gains. So if young Sam is holding a
house or a some sort of rental property, if it
(02:23):
goes up in value in a 12 month period, even
though you haven't sold it, you would be paying tax
on that unrealized capital gain. The other thing, the other
big sticking point was the fact he said, rather than
index that 3 million threshold, we're not going to do that.
His argument was future governments will make that decision. Now,
(02:43):
banking on future governments, winding back such a such a
change is courageous, I think would be the description, but
it meant that someone going into the workforce today, in 30,
35 years time Haim could really easily have $3 million
in assets within their Superfund, and they'd be hit by this.
(03:04):
So they were the two really key issues that came up.
Now it's sat there and he said at the time,
we're going to take this to the election, and the
people of Australia can decide, come to the May election.
The voters of Australia made some pretty telling commentary on
largely on the Liberal Party rather than the Labor Party.
(03:25):
So there's his proposal. But that's when this huge response,
particularly by some of the wealthiest, best connected, uh, investor
classes in the country, said, hey, let's change this. This
is outrageous. End of days. You know, cats and dogs
living together. That's what this sort of argument went. And
(03:46):
we get to this point on Monday when the treasurer says, oops,
we're going to change.
S1 (03:52):
Okay, well, let's get this, because somewhat controversially, I think
it's safe to say Jim Chalmers, of course, made this announcement, while,
handily enough, Prime Minister Anthony Albanese was on leave. We'll
get to that. But Jim Chalmers, he fronts the media
and he announces that there's going to be a tweak
to his superannuation tax concessions. So walk us through this tweak.
What is the upshot? What are the changes and how
(04:14):
big are they?
S2 (04:15):
That's, uh, an Albanese shuffle to get outside of the
outside of the coverage of the media for the treasurer. Well,
if you think it's a tweak, then, uh, Shane Warne's
ball of the century that got out, got Mike Gatting
out was just, you know, a ha a half Dekker
that should have been dispatched out of the ground. So
taxation of unrealized gains is gone. So only the realized gains.
(04:40):
So once you sell something the capital gain on that,
the income on that will come under the the new
tax arrangements indexation is in. So there's a little argy
bargy about exactly what type of indexation. But that $3
million threshold will go up. It's been pushed back a year.
(05:00):
It's actually supposed to be started on July 1st this year,
but that's been pushed back. The other big change, which
had not been expected at all, was that an issue
that has been hanging around for several years and was
going to get worse, is there's a payment called the
Low Income Superannuation Tax offset. So if you earn under $37,000,
(05:24):
you get paid by the government $500 to go into
your super. Now, if that didn't happen, these low income
earners would actually be paying more tax on their super
than a concessional rate, which is the whole purpose of super.
So he said, right, we're going to increase that from
500 to $810, and we're going to lift the threshold
(05:45):
to $45,000 by the middle of 2027, when the tax
cuts that were announced in this year's budget also kick in.
So lots of lots of moving dice all going on,
as well as a big change to the amount of revenue.
He's been very quiet on that front at this stage,
says Wright. In two years time, 2028, when this whole
(06:06):
thing would be absolutely working as it's supposed to, he says.
Wright we were going to get about 2.5 billion. In
that year, we'll get about 2 billion. But this is
where the issue around indexation comes in, because if you
by indexing it, far fewer people will ultimately get caught
up in this new tax arrangement. But now they will.
(06:29):
And one final point, which is really important, which is
instead of everybody over 3 million being affected, he's introduced
a $10 million threshold above which the income you earn
in there will be hit by 40%. Now, this is
a really this is really interesting because this has been debated.
(06:49):
If you're if you're superannuation nerd this idea of really
cutting into the there's about 8000 people who have huge
superannuation accounts. They are not being used for retirement income. You,
I and the rest of the Age and Sydney Morning
Herald staff would have trouble spending in our retirement. The
amount of money that some of these people have. We're
(07:11):
talking into the tens and hundreds of millions of dollars.
So he's introduced this $10 million, 40% tax rate, which
is interesting because we're coming back to where superannuation, that
sort of thing was pre John Howard and Peter Costello,
some pretty important changes that they made just before they
left office back in 0607.
S3 (07:32):
Okay. So I want to ask you, I guess just
straight up why is.
S1 (07:36):
This backflip such a political embarrassment. Because it's not just
you who's sort of terming it that way. Our colleague
James Massola has called it humiliating.
S3 (07:44):
Is there some.
S1 (07:45):
Suggestion that this backflip is almost a manipulative move on
the government, like labor went to the election in part
with this tax plan that, yes, some very wealthy people,
you know, pushed back majorly on it at the time. But,
you know, we voted it in. Now it's been upended.
So is it sort of. Yeah. Is this seen as
a manipulative mood or somehow a betrayal?
S2 (08:04):
I don't know if it's manipulative betrayal, but it's interesting
because Anthony Albanese absolutely smashed the Liberal Party in the election.
Like worst performance by the Liberal Party since its inception.
Labor's best performance at an election since John Curtin was
prime minister. And yet, the political pushback by only a
(08:27):
small sliver of the community has been enough to force
this change. Now, it could be that right. Anthony Albanese
makes this call saying, we want changes that won't be
pulled apart by a future government, which has always been like,
let's go back to Medicare, for instance, when Gough Whitlam
(08:49):
introduced it. Malcolm Fraser got rid of it almost within
coming to office. So big labor reforms, the fear inside
the Labor Party is that they'll get undone. Superannuation has been,
like pulled and prodded ever since Paul Keating put in
the superannuation guarantee back in the early 90s, so maybe
(09:11):
that's part of it. But it shows to the opposition, right?
If we mount enough of a campaign, even though we
haven't got the numbers, we could actually force these guys
into something. For a treasurer, it is embarrassing to go
back so much on something that he had spent the
past two years defending.
S1 (09:31):
We'll be right back.
S3 (09:38):
Okay, so I'm going to give.
S1 (09:39):
The listeners a moment to, you know, bring out their
tiny violins to cry for the poor treasurers, uh, with
their massive salaries, you know, having to sort of eat
humble pie every now and again. But but on the
face of it, like, is this backflip actually a good
thing for most Australians or not? Because I believe that
almost all our economists have called the changes sensible and
(09:59):
that they've kind of been begging for them. Right.
S2 (10:01):
Ah, I'd be wary about economists understanding what's going on inside,
like inside superannuation and tax arrangements. I'd be very wary
in that space because this is an investment class, and
this is part of the issue that that's coming through,
that superannuation has gone beyond retirement income into its own
(10:23):
investment class. Like as soon as Chalmers announced this on Monday,
I was getting emails from people in that investment space saying, oh,
what's this going to do about your long term? How
do you increase your wealth? Superannuation is not supposed to
be about increasing wealth. It's about making sure you've got
a great lifestyle when you finish up in paid employment.
S4 (10:43):
I really wanted to ask you about this.
S1 (10:44):
So walk us through how these changes are going to
affect people earning low wages.
S2 (10:49):
Yeah. So at the moment you get your 500 bucks,
which goes into your super account. And as I said,
the effective tax rate once the government's new the reduction
in the bottom tax rate kicks in over the next
two years, people would actually be paying a higher tax
rate on their super than on what they're earning. You're
(11:10):
not actually rewarding people for saving. So one, you increase
that to $810 and you increase the threshold at which
it ends. So for those $3 million, like it is
going to be worth thousands of dollars once they finally retire.
Just that one change. Now this is really weird because
it hasn't the threshold and the amount has not been
(11:32):
indexed since it was introduced in 2017. And this is
the this was Chalmers argument. Oh, our future government will
have to come in and do the indexation. That's what
he had to do. In fact, he's overcompensated in some
small sections to make sure it's really worth the while
of your low income earners. But this was always one
(11:53):
of the problems with not indexing in the first place,
that ultimately you were going to capture so many more people.
Great for the budget bottom line, which we can't forget.
That's a key part of this. However, whether you want
average income earners to be paying a much higher rate
of tax on their super or not, I think a
(12:14):
lot of a lot of Australians would say, oh, hold on,
that's not how it's supposed to be working.
S4 (12:18):
Can you walk us through step by.
S1 (12:20):
Step or perhaps category by category, low income earners, medium
income earners, high income earners? How these changes are actually
going to affect them. Like break it down for us.
For those of us who find this very difficult to understand.
And I'm definitely going to include myself in that.
S2 (12:34):
Right. So under 45,000, which is when this kicks in
for the low income offset, super offset in the next
two years, they are better off. Absolutely for about 11
to 12 million other people. This actually doesn't affect them.
That's the group of people who are not low income earners,
who have not got $3 million in their super. I
(12:56):
think 10 or 11 million might be too many. But
you can see the quantum I'm trying to get across.
And then there's this group of people, the 50 to 70,000,
with more than $3 million in their super who will
ultimately pay more tax. There is absolutely no shadow of
a doubt, be it $2 billion or $2.5 billion, their
super accounts will be paying more tax. So if you
(13:20):
think there's the great continuum of the of Australia, if
those over 10 million like once you play like it's 40%
tax rate on income over that 10 million mark. These
people once you take into account how they modify their
own taxable income, which top tax rates 45 plus the
Medicare levy, it's almost you think it's not worth it
(13:43):
to keep putting money in. So that's actually the absolute
goal is to actually say, right, we think 10 million
is about right. And remember that's going to be indexed.
That threshold is going to be indexed as well. So
you're not on Struggle Street. Um, you may not be
able to buy the second yacht. That might be the
uh the, the shortcoming with that. And let's not forget
(14:04):
the change around the low income tax. Superannuation offset means
a lot to about 3 million low income people. Yeah,
these 3 million people, 60% of them are women. Most
of them a lot of them are part time will
actually end up better off by having this extra income.
(14:25):
But then you get into the other the vast majority
of people, because the indexation issue is now fixed for them.
Their chances of finding their way into that $3 million, uh,
grouping is, is becomes very it becomes much more difficult.
S1 (14:42):
And you mentioned the implications on the federal budget. So
let's talk about this about how this impacts the budget.
Like how much of a hole is this going to
leave in the federal budget?
S2 (14:51):
Well, that's one of the great questions you've asked, because
they've been very quiet about explaining the longer term. So
longer term, in budget jargon, we talk about the medium term,
which is about ten years out. This change was going
to raise tens of billions of dollars, which would have
actually helped repair the budget bottom line. It's unclear how
(15:15):
long how much the indexation will reduce. The change there
will reduce that. But the one number that Chalmers has
given away, which is this instead of 2.5 billion, we're
going to raise 2 billion, gives you some idea, $500
million between you and I. You know, it's a rounding
error for for most budgets sadly to say that. But
(15:38):
just like superannuation this is compound interest sort of stuff.
So the further out you get, the bigger the gulf
between what they'd hoped to get and what they will
ultimately get.
S1 (15:48):
So does that have an impact on future taxpayers or
not really?
S2 (15:52):
Yes. But with. So no change would actually have been
far worse. Like as in dumping the whole change. So
the budget would have been in tens, maybe even hundreds
of billions of dollars worse off over the medium term.
So this is what this was actually part of the
the whole argument from Jim Chalmers in the first place,
(16:13):
which is that the tax concessions around super are that generous.
They are eating a bit into the budget. We've got
to do something, and we aim at those people who
are not using super for their retirement, they're using to
maximise their wealth and then make sure that their offspring
get a share of that wealth, like it's an intergenerational
(16:36):
wealth transfer vehicle. Superannuation, that's what it's become. And that
is not what it was set up to be.
S5 (16:42):
And so just to wrap.
S1 (16:43):
Up, Shane, this backflip, should this be a signal to
all of us taxpayers that perhaps this is just the
beginning of the government's changes to superannuation tax? Like, is
this a signal that there's going to be other tax
changes to our super in the near future?
S2 (16:58):
Well, Jim Chalmers said no. Uh, the history of treasurers
and superannuation would suggest that's not quite correct. There's been
a lot of change in super since this government came
to office. Some of it is to make it more
generous for lower income earners. For instance, some of it's
aimed uh, around, uh, new mothers, uh, say superannuation payments
(17:23):
that they, they now receive. But ultimately it is and
Treasury itself, the department has never been a fan of superannuation.
Uh because they say what about all this forgone tax?
Of course, foregone tax means if no one's getting super,
then hold on. There's a lot of pensioners out there
who will be demanding far, far more and you get
(17:45):
into an equity issue around older people. What sort of
retirement they're supposed to have. We could relitigate the whole
debate from the late 80s and early 90s.
S1 (17:55):
I mean, I know you want to.
S2 (17:56):
No, let's not let's not do that today. But yeah,
that's where we end up. Um, so he says no.
S1 (18:04):
And you're saying we don't believe him or we shouldn't?
S2 (18:07):
I'm just saying a future treasurer may come to another conclusion.
S1 (18:10):
Yeah, right. Okay, well, we know this is like a
bit of a day in the sun for you, Shane,
because we know you love nothing more than to talk
super tax. Uh, for those of us.
S6 (18:18):
I can think of a few other.
S2 (18:19):
Things on my list.
S1 (18:21):
I don't know, I think I think you might be lying, but.
S6 (18:24):
I think Kate.
S2 (18:24):
Bush would be at number.
S1 (18:26):
One. Bush is number one. And then, you know, your
dog is number two. And let's face it, tax is
like coming up hot on number three. Whereas for the
rest of us, you know, it's it's it's a bit
of a punish. But we appreciate you taking us through it.
So thank you so much Shane for your time.
S6 (18:40):
It's always a pleasure to talk to you, Samantha.
S1 (18:55):
Today's episode of The Morning Edition was produced by myself
and Josh towers. Our executive producer is Tammy Mills. Tom
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(19:17):
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your inbox every morning. Links are in the show. Notes.
I'm Samantha Selinger. Morris, thanks for listening.
From the newsrooms of the Sydney Morning Herald and The Age.
This is the morning edition. I'm Samantha Sellinger Morris. It's Wednesday,
October 15th. It was the superannuation tax plan that helped
labor achieve a landslide victory in the last election. Though
some of Australia's wealthiest Australians, who were hit hardest by
(00:25):
the plan, cried foul. The government has been saying for
more than two years that it would not change its
super proposals. Flash forward to this week when, in an
embarrassing political backflip, Treasurer Jim Chalmers announced yep, major changes
to it. Today, senior economics correspondent Shane Wright on what
(00:45):
these changes are and how you'll be impacted by them. So, Shane,
you have just written that our treasurer's changes to his
superannuation tax plan amount to a spin so outrageous that
even Shane Warne would have struggled to match it. That's
pretty damning, and we're going to get into that. But
(01:07):
just first off, can you briefly remind us what was
Jim Chalmers initial superannuation tax plan that he announced in 2023?
S2 (01:15):
Yeah. So let's go back to the 2023 budget. Happier
days for treasurers back then even though inflation was on
the rampage. But at that time, he said, look, we
have to do something about superannuation concessions, which Treasury estimates
this year are going to cost everybody $55 billion in
(01:35):
foregone taxation. Let's put that to one side. But that's
what's really at the heart of this issue. And he
comes up with this idea, right. We're going to hit
increase the tax on people who have accounts with more
than $3 million in them. We are talking a small
number of people right at the moment, like we're talking
50 to 70,000 in a country of 27 million. So
(02:00):
that's the perspective. But it was what he came up with.
That was the big issue. Apart from increasing the tax
rate by 15 percentage points. So he effectively doubled it.
It was right. We're going to start taxing what are
called unrealized gains. So if young Sam is holding a
house or a some sort of rental property, if it
(02:23):
goes up in value in a 12 month period, even
though you haven't sold it, you would be paying tax
on that unrealized capital gain. The other thing, the other
big sticking point was the fact he said, rather than
index that 3 million threshold, we're not going to do that.
His argument was future governments will make that decision. Now,
(02:43):
banking on future governments, winding back such a such a
change is courageous, I think would be the description, but
it meant that someone going into the workforce today, in 30,
35 years time Haim could really easily have $3 million
in assets within their Superfund, and they'd be hit by this.
(03:04):
So they were the two really key issues that came up.
Now it's sat there and he said at the time,
we're going to take this to the election, and the
people of Australia can decide, come to the May election.
The voters of Australia made some pretty telling commentary on
largely on the Liberal Party rather than the Labor Party.
(03:25):
So there's his proposal. But that's when this huge response,
particularly by some of the wealthiest, best connected, uh, investor
classes in the country, said, hey, let's change this. This
is outrageous. End of days. You know, cats and dogs
living together. That's what this sort of argument went. And
(03:46):
we get to this point on Monday when the treasurer says, oops,
we're going to change.
S1 (03:52):
Okay, well, let's get this, because somewhat controversially, I think
it's safe to say Jim Chalmers, of course, made this announcement, while,
handily enough, Prime Minister Anthony Albanese was on leave. We'll
get to that. But Jim Chalmers, he fronts the media
and he announces that there's going to be a tweak
to his superannuation tax concessions. So walk us through this tweak.
What is the upshot? What are the changes and how
(04:14):
big are they?
S2 (04:15):
That's, uh, an Albanese shuffle to get outside of the
outside of the coverage of the media for the treasurer. Well,
if you think it's a tweak, then, uh, Shane Warne's
ball of the century that got out, got Mike Gatting
out was just, you know, a ha a half Dekker
that should have been dispatched out of the ground. So
taxation of unrealized gains is gone. So only the realized gains.
(04:40):
So once you sell something the capital gain on that,
the income on that will come under the the new
tax arrangements indexation is in. So there's a little argy
bargy about exactly what type of indexation. But that $3
million threshold will go up. It's been pushed back a year.
(05:00):
It's actually supposed to be started on July 1st this year,
but that's been pushed back. The other big change, which
had not been expected at all, was that an issue
that has been hanging around for several years and was
going to get worse, is there's a payment called the
Low Income Superannuation Tax offset. So if you earn under $37,000,
(05:24):
you get paid by the government $500 to go into
your super. Now, if that didn't happen, these low income
earners would actually be paying more tax on their super
than a concessional rate, which is the whole purpose of super.
So he said, right, we're going to increase that from
500 to $810, and we're going to lift the threshold
(05:45):
to $45,000 by the middle of 2027, when the tax
cuts that were announced in this year's budget also kick in.
So lots of lots of moving dice all going on,
as well as a big change to the amount of revenue.
He's been very quiet on that front at this stage,
says Wright. In two years time, 2028, when this whole
(06:06):
thing would be absolutely working as it's supposed to, he says.
Wright we were going to get about 2.5 billion. In
that year, we'll get about 2 billion. But this is
where the issue around indexation comes in, because if you
by indexing it, far fewer people will ultimately get caught
up in this new tax arrangement. But now they will.
(06:29):
And one final point, which is really important, which is
instead of everybody over 3 million being affected, he's introduced
a $10 million threshold above which the income you earn
in there will be hit by 40%. Now, this is
a really this is really interesting because this has been debated.
(06:49):
If you're if you're superannuation nerd this idea of really
cutting into the there's about 8000 people who have huge
superannuation accounts. They are not being used for retirement income. You,
I and the rest of the Age and Sydney Morning
Herald staff would have trouble spending in our retirement. The
amount of money that some of these people have. We're
(07:11):
talking into the tens and hundreds of millions of dollars.
So he's introduced this $10 million, 40% tax rate, which
is interesting because we're coming back to where superannuation, that
sort of thing was pre John Howard and Peter Costello,
some pretty important changes that they made just before they
left office back in 0607.
S3 (07:32):
Okay. So I want to ask you, I guess just
straight up why is.
S1 (07:36):
This backflip such a political embarrassment. Because it's not just
you who's sort of terming it that way. Our colleague
James Massola has called it humiliating.
S3 (07:44):
Is there some.
S1 (07:45):
Suggestion that this backflip is almost a manipulative move on
the government, like labor went to the election in part
with this tax plan that, yes, some very wealthy people,
you know, pushed back majorly on it at the time. But,
you know, we voted it in. Now it's been upended.
So is it sort of. Yeah. Is this seen as
a manipulative mood or somehow a betrayal?
S2 (08:04):
I don't know if it's manipulative betrayal, but it's interesting
because Anthony Albanese absolutely smashed the Liberal Party in the election.
Like worst performance by the Liberal Party since its inception.
Labor's best performance at an election since John Curtin was
prime minister. And yet, the political pushback by only a
(08:27):
small sliver of the community has been enough to force
this change. Now, it could be that right. Anthony Albanese
makes this call saying, we want changes that won't be
pulled apart by a future government, which has always been like,
let's go back to Medicare, for instance, when Gough Whitlam
(08:49):
introduced it. Malcolm Fraser got rid of it almost within
coming to office. So big labor reforms, the fear inside
the Labor Party is that they'll get undone. Superannuation has been,
like pulled and prodded ever since Paul Keating put in
the superannuation guarantee back in the early 90s, so maybe
(09:11):
that's part of it. But it shows to the opposition, right?
If we mount enough of a campaign, even though we
haven't got the numbers, we could actually force these guys
into something. For a treasurer, it is embarrassing to go
back so much on something that he had spent the
past two years defending.
S1 (09:31):
We'll be right back.
S3 (09:38):
Okay, so I'm going to give.
S1 (09:39):
The listeners a moment to, you know, bring out their
tiny violins to cry for the poor treasurers, uh, with
their massive salaries, you know, having to sort of eat
humble pie every now and again. But but on the
face of it, like, is this backflip actually a good
thing for most Australians or not? Because I believe that
almost all our economists have called the changes sensible and
(09:59):
that they've kind of been begging for them. Right.
S2 (10:01):
Ah, I'd be wary about economists understanding what's going on inside,
like inside superannuation and tax arrangements. I'd be very wary
in that space because this is an investment class, and
this is part of the issue that that's coming through,
that superannuation has gone beyond retirement income into its own
(10:23):
investment class. Like as soon as Chalmers announced this on Monday,
I was getting emails from people in that investment space saying, oh,
what's this going to do about your long term? How
do you increase your wealth? Superannuation is not supposed to
be about increasing wealth. It's about making sure you've got
a great lifestyle when you finish up in paid employment.
S4 (10:43):
I really wanted to ask you about this.
S1 (10:44):
So walk us through how these changes are going to
affect people earning low wages.
S2 (10:49):
Yeah. So at the moment you get your 500 bucks,
which goes into your super account. And as I said,
the effective tax rate once the government's new the reduction
in the bottom tax rate kicks in over the next
two years, people would actually be paying a higher tax
rate on their super than on what they're earning. You're
(11:10):
not actually rewarding people for saving. So one, you increase
that to $810 and you increase the threshold at which
it ends. So for those $3 million, like it is
going to be worth thousands of dollars once they finally retire.
Just that one change. Now this is really weird because
it hasn't the threshold and the amount has not been
(11:32):
indexed since it was introduced in 2017. And this is
the this was Chalmers argument. Oh, our future government will
have to come in and do the indexation. That's what
he had to do. In fact, he's overcompensated in some
small sections to make sure it's really worth the while
of your low income earners. But this was always one
(11:53):
of the problems with not indexing in the first place,
that ultimately you were going to capture so many more people.
Great for the budget bottom line, which we can't forget.
That's a key part of this. However, whether you want
average income earners to be paying a much higher rate
of tax on their super or not, I think a
(12:14):
lot of a lot of Australians would say, oh, hold on,
that's not how it's supposed to be working.
S4 (12:18):
Can you walk us through step by.
S1 (12:20):
Step or perhaps category by category, low income earners, medium
income earners, high income earners? How these changes are actually
going to affect them. Like break it down for us.
For those of us who find this very difficult to understand.
And I'm definitely going to include myself in that.
S2 (12:34):
Right. So under 45,000, which is when this kicks in
for the low income offset, super offset in the next
two years, they are better off. Absolutely for about 11
to 12 million other people. This actually doesn't affect them.
That's the group of people who are not low income earners,
who have not got $3 million in their super. I
(12:56):
think 10 or 11 million might be too many. But
you can see the quantum I'm trying to get across.
And then there's this group of people, the 50 to 70,000,
with more than $3 million in their super who will
ultimately pay more tax. There is absolutely no shadow of
a doubt, be it $2 billion or $2.5 billion, their
super accounts will be paying more tax. So if you
(13:20):
think there's the great continuum of the of Australia, if
those over 10 million like once you play like it's 40%
tax rate on income over that 10 million mark. These
people once you take into account how they modify their
own taxable income, which top tax rates 45 plus the
Medicare levy, it's almost you think it's not worth it
(13:43):
to keep putting money in. So that's actually the absolute
goal is to actually say, right, we think 10 million
is about right. And remember that's going to be indexed.
That threshold is going to be indexed as well. So
you're not on Struggle Street. Um, you may not be
able to buy the second yacht. That might be the
uh the, the shortcoming with that. And let's not forget
(14:04):
the change around the low income tax. Superannuation offset means
a lot to about 3 million low income people. Yeah,
these 3 million people, 60% of them are women. Most
of them a lot of them are part time will
actually end up better off by having this extra income.
(14:25):
But then you get into the other the vast majority
of people, because the indexation issue is now fixed for them.
Their chances of finding their way into that $3 million, uh,
grouping is, is becomes very it becomes much more difficult.
S1 (14:42):
And you mentioned the implications on the federal budget. So
let's talk about this about how this impacts the budget.
Like how much of a hole is this going to
leave in the federal budget?
S2 (14:51):
Well, that's one of the great questions you've asked, because
they've been very quiet about explaining the longer term. So
longer term, in budget jargon, we talk about the medium term,
which is about ten years out. This change was going
to raise tens of billions of dollars, which would have
actually helped repair the budget bottom line. It's unclear how
(15:15):
long how much the indexation will reduce. The change there
will reduce that. But the one number that Chalmers has
given away, which is this instead of 2.5 billion, we're
going to raise 2 billion, gives you some idea, $500
million between you and I. You know, it's a rounding
error for for most budgets sadly to say that. But
(15:38):
just like superannuation this is compound interest sort of stuff.
So the further out you get, the bigger the gulf
between what they'd hoped to get and what they will
ultimately get.
S1 (15:48):
So does that have an impact on future taxpayers or
not really?
S2 (15:52):
Yes. But with. So no change would actually have been
far worse. Like as in dumping the whole change. So
the budget would have been in tens, maybe even hundreds
of billions of dollars worse off over the medium term.
So this is what this was actually part of the
the whole argument from Jim Chalmers in the first place,
(16:13):
which is that the tax concessions around super are that generous.
They are eating a bit into the budget. We've got
to do something, and we aim at those people who
are not using super for their retirement, they're using to
maximise their wealth and then make sure that their offspring
get a share of that wealth, like it's an intergenerational
(16:36):
wealth transfer vehicle. Superannuation, that's what it's become. And that
is not what it was set up to be.
S5 (16:42):
And so just to wrap.
S1 (16:43):
Up, Shane, this backflip, should this be a signal to
all of us taxpayers that perhaps this is just the
beginning of the government's changes to superannuation tax? Like, is
this a signal that there's going to be other tax
changes to our super in the near future?
S2 (16:58):
Well, Jim Chalmers said no. Uh, the history of treasurers
and superannuation would suggest that's not quite correct. There's been
a lot of change in super since this government came
to office. Some of it is to make it more
generous for lower income earners. For instance, some of it's
aimed uh, around, uh, new mothers, uh, say superannuation payments
(17:23):
that they, they now receive. But ultimately it is and
Treasury itself, the department has never been a fan of superannuation.
Uh because they say what about all this forgone tax?
Of course, foregone tax means if no one's getting super,
then hold on. There's a lot of pensioners out there
who will be demanding far, far more and you get
(17:45):
into an equity issue around older people. What sort of
retirement they're supposed to have. We could relitigate the whole
debate from the late 80s and early 90s.
S1 (17:55):
I mean, I know you want to.
S2 (17:56):
No, let's not let's not do that today. But yeah,
that's where we end up. Um, so he says no.
S1 (18:04):
And you're saying we don't believe him or we shouldn't?
S2 (18:07):
I'm just saying a future treasurer may come to another conclusion.
S1 (18:10):
Yeah, right. Okay, well, we know this is like a
bit of a day in the sun for you, Shane,
because we know you love nothing more than to talk
super tax. Uh, for those of us.
S6 (18:18):
I can think of a few other.
S2 (18:19):
Things on my list.
S1 (18:21):
I don't know, I think I think you might be lying, but.
S6 (18:24):
I think Kate.
S2 (18:24):
Bush would be at number.
S1 (18:26):
One. Bush is number one. And then, you know, your
dog is number two. And let's face it, tax is
like coming up hot on number three. Whereas for the
rest of us, you know, it's it's it's a bit
of a punish. But we appreciate you taking us through it.
So thank you so much Shane for your time.
S6 (18:40):
It's always a pleasure to talk to you, Samantha.
S1 (18:55):
Today's episode of The Morning Edition was produced by myself
and Josh towers. Our executive producer is Tammy Mills. Tom
McKendrick is our head of audio. To listen to our
episodes as soon as they drop, follow the Morning Edition
on Apple, Spotify, or wherever you listen to podcasts. Our
newsrooms are powered by subscriptions, so to support independent journalism,
(19:17):
visit The Age or smh.com.au. Subscribe. And to stay up
to date, sign up to our Morning Edition newsletter to
receive a summary of the day's most important news in
your inbox every morning. Links are in the show. Notes.
I'm Samantha Selinger. Morris, thanks for listening.
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