Super balances have had their best year since 2021 as Labor plots a new way to raise taxes on retirement savings.
Balanced super picks, geared toward growth assets, enjoyed an 11.5 percent rise in 2024, new data from SuperRatings showed.
This was the best year since 2021, when Reserve Bank interest rates were still at a record low of 0.1 per cent, and the Australian stock market hit a record high in early December.
It was also almost double the annual average of 6.7 percent since 2000.
SuperRatings chief executive Kirby Rappell said Australian super balances with higher equity exposure and a 60 to 76 per cent orientation towards growth assets performed particularly well.
“This year will be the second consecutive year of strong returns as the funds continue to deliver results for members over the long term,” he said.
‘We have continued to see strong performance in the equity markets which have been the key driver of this profitability result.
“The majority of this year’s returns have come from share markets, which are now trading at all-time highs both in Australia and internationally.”
Super balances have had their best year since 2021 as Labor plans how to raise taxes on retirement savings (pictured pedestrians in Sydney city centre)
Balanced super picks, geared toward growth assets, enjoyed an 11.5 percent rise in 2024, new data from SuperRatings shows (pictured)
The outcome for 2024 has marked a turnaround from the 4.8 per cent drop in 2022, when the RBA began the first of its 13 rate hikes.
But the good news could be cut short as Labor is still determined to double income taxes to 30 per cent, up from 15 per cent, for retirement balances over $3 million.
This would apply from July 2025, during the super-savings accumulation phase, in case the government reaches an agreement with minor parties in the Senate early next year.
That possible change would also come into effect after the next elections, scheduled for May 2025.
Premier Anthony Albanese and Treasurer Jim Chalmers also want to impose an additional 15 per cent tax on unrealized profits above that $3 million threshold.
This means that self-managed retirement funds that held assets such as property above $3 million would pay taxes on those assets before they were sold.
This is a radical departure from the usual approach of taxing assets once they have been discharged.
Labour’s polarizing plans stalled when Parliament concluded in November because the Greens did not believe the government’s super plans went far enough: they wanted the threshold lowered to $1.9 million.
This was the best year since 2021, when Reserve Bank interest rates were still at a record low of 0.1 per cent, and the Australian stock market hit a record high in early December (pictured, an auctioneer at a property in Melbourne).
The government could try to negotiate with the Greens again in February, in a bid to pass its pension concessions bill and other better-targeted measures before Parliament dissolves for elections.
Rappell said nervousness about the pace of interest rate cuts in Australia and the United States could make 2025 a more difficult year for super funds.
“A correction in the equity markets would have a strong effect on members’ retirement balances and members should be prepared to see ups and downs in the short term,” he said.
“Inflation, particularly in Australia, also remains persistent, Australian interest rates are likely to decline slowly over time and cost of living pressures remain elevated.”
Mandatory employer pension contributions will rise on July 1 to 12 per cent, up from 11.5 per cent currently.
The futures market now expects three rate cuts in 2025, which would see the Reserve Bank cash rate fall from 4.35 percent to 3.6 percent for the first time since May 2023.