Prime Minister Anthony Albanese’s plan to double the tax rate for Australia’s wealthiest super savers will affect 500,000 people – not 80,000 individuals as the government claims.
The Financial Services Council has released new models showing that the $3 million pension cap will benefit six times more people than Labor says, with young workers to be absorbed over the next few decades.
Of the 500,000 who will be affected by Labour’s policies, 204,000 will be workers under 30.
The changes were announced after official data from the banking regulator showed Australia’s retirement savings pool shrank by three per cent in 2022 as interest rates rose.
Mr Albanese and his treasurer Jim Chalmers have argued that their plan to double the concessional tax rate on super concessions from 1 July 2025 – from 15 per cent to 30 per cent – would only affect 0.5 per cent of the population.
This is part of a plan to save the budget $2 billion a year in lost revenue.
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The Financial Services Council has released new models showing the $3 million pension cap would benefit six times more people than Labor claims, with young workers set to be in trouble for decades to come (Photo: Sydney CBD office workers)
But Blake Briggs, the chief executive of the Financial Services Council, said Labor’s refusal to index the $3 million limit to inflation would mean 500,000 Australians now in work would be affected for decades to come.
“If the government does not index the proposed $3 million pension balance limit, 500,000 Australian taxpayers will exceed the limit in their lifetimes and face 30 per cent income tax, including 204,000 Australians under the age of 30,” he said.
The Financial Services Council — which represents pension funds managed by large corporations — said workers in their 20s are likely to have $3 million in super over four decades as inflation and wage growth exacerbated levels of retirement savings.
That means a 25-year-old IT technician making $100,000 a year on just $35,000 in super now would reach the $3 million threshold at age 65 — two years before this person could qualify for the retirement pension.
So is a 45-year-old school principal who makes $150,000 and now has $650,000 in super or a 55-year-old dentist who makes $220,000 and now has $1.4 million in super.
Anthony Albanese’s plan to double the tax rate for Australia’s richest super savers would affect 500,000 people – not 80,000 individuals as the government claimed (the Prime Minister is pictured in the center with his girlfriend Jodie Haydon and Australian of the Year Taryn Brumfitt)
Who are the 500,000 affected Australians?
A 25-year-old IT technician who makes $100,000 a year with only $35,000 in super now would have $3 million in super savings by age 65.
A 45-year-old school principal who earns $150,000 a year with $650,000 in super now would have $3 million in retirement savings by age 65.
A 55-year-old dentist who earns $220,000 on $1.4 million in super now would have $3 million in retirement by 65.
Source: Financial Services Council modeled on the Albanian government’s plan to limit the 15 percent super-contribution tax to $3 million in account balances if the threshold is not indexed for inflation.
Dr. Chalmers explicitly ruled out adjusting the $3 million limit for inflation — a process known as indexing — on Wednesday.
“A future government can decide to change the $3 million threshold — if a future government decides they want to lift it, then they can pay for it,” he said.
Clearly, as more people save more than $3 million in retirement over time, they will still be subject to generous tax breaks, but slightly less.
“People who have more than $3 million in retirement — and good for them — we think that’s a good thing, people have enough savings for a decent retirement.”
Australia’s pension pool shrank last year as the Reserve Bank raised interest rates eight times to cope with inflation rising to a 32-year high of 7.8 percent.
The Australian Prudential Regulation Authority revealed that total super-savings fell by three percent to $3,386.9 billion in 2022 from $3,489.9 billion.
Within that pool, standard retirement products — known as MySuper — were worth $917.3 billion, a 3.1 percent annual decline from $946.8 billion.
Self-managed super funds were worth $880.6 billion, down 2.4 percent from $901.8 billion.
APRA blamed interest rate hikes for super declining.
“This reflected volatility in financial markets following aggressive monetary tightening by global central banks to curb inflation, which slowed economic growth,” the report said.
Australia’s three-month quarterly economic growth was just 0.5 per cent in the December quarter of 2022, a very sharp decline from the December quarter of 2021, when gross domestic product increased by 3.7 per cent as lockdowns eased ended up in Sydney and Melbourne.
GDP per capita – or economic output for each individual – remained flat, despite arrivals of migrants in 2021-22 rising 171 percent to 395,000, up from 146,000.