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Government confirms tax changes to superannuation accounts with balances over $3m
Josh Butler
From 2025-26, the concessional tax rate applied to future earnings for balances above $3m will be 30%.
The change is expected to apply to around 80,000 people, which is 0.5% of the Australian population.
The 15% rate continues for balances under $3m.
Key events
Taking questions, Albanese wants to emphasise this is his government taking a long term view to the challenges facing the country:
This is about long-term sustainability and the structural problems that are there. One of the things I often get in media conferences, why do politicians always just focus on the short term? Where’s the long term thinking? My government is focused on short term issues – we’re focused on dealing with the floods, all of that – but we’re very much focused as well on the long term challenges that Australia faces. That’s why we’re making this decision.
Anticipating the Coalition’s criticisms, Chalmers warns the opposition will have to explain to the Australian people why they’re “prepared to go to war for the one half of 1% of people.”
Now, one final thing about our opponents. This is the same – these are the same people who gave us a trillion dollars of debt and deficits as far as the eye can see, they now want to borrow even more and have even bigger deficits in order to give the most generous tax breaks to people with tens of millions of dollars in super.
In 2016, they jacked up taxes on superannuation to the tune of $5 billion. At the time, Angus Taylor said it’s inappropriate that someone who contributed millions and millions of dollars continues to get the 15% concessions. That’s what Angus Taylor said in 2016 when they increased taxes on super.
If they want to vote against this change and try and prevent this change, they can explain to people why they’re not prepared to back energy bill relief for pensioners, they’re not prepared to back people fleeing domestic violence with more affordable homes, and a broader and deeper industrial base in this country, manufacturing jobs, but they’re prepared to go to war for the one half of 1% of people with more than $3 million of superannuation in their accounts.
They can explain that to the Australian people. We take our responsibilities seriously. This is about responsible economic management. We think we have struck the right balance here and we’re confident we have.
Chalmers says while he knows this is a contentious area, he’s confident Australians are going to understand this is a fair change:
I’m confident that Australians will see this change as modest and reasonable and fair. But one which makes a difference to the sustainability and affordability of the superannuation system that we cherish.
I think it’s good that more people have become aware over the course of the last week or so, about some of the features of the tax concessions in superannuation, I know this is and can be a contentious area.
But equally, we take our responsibility to manage the budget in a common sense way, very, very seriously. We are interested in the right path here, and not just the path of least resistance.
Amy Remeikis
So who are we talking here? What are the numbers?
Anthony Albanese:
People can see what we’re doing here. Which is we’re proposing a change that will have the impact on 0.5% of the population. And Mark [Riley, reporter], if you knew there was someone out there who had $400 million in their superannuation account, I didn’t, if you knew there was 17 people who had $100 million in their account, I didn’t, and it’s hard to argue that those levels is about actual retirement incomes. Which is what superannuation is for.
Chalmers clarifies some of those numbers around super and who this will affect:
The average superannuation balance is about $150,000. And the few people with balances above $3 million hold an average of almost $6 million in their accounts.
As the prime minister said, 17 people have got more than $100m, one person has got more than $400m.
$100m fund earning a 5% return receives a tax break upwards of $1.5 million a year, compared to a return outside of super if it was taxed at the marginal rate.
It takes 100 average wake earners paying the average amount of tax to pay the tax break for that simple super account every year.
100 ordinary people to fund with their taxes the tax break on someone with $100m in super.
Every dollar spent on a tax break with tens of millions of dollars in super is a borrowed dollar that makes the deficit bigger.
There will still be tax concessions for you, they just won’t be quite as generous as they were before.
Amy Remeikis
Treasurer Jim Chalmers is being VERY careful in his language in announcing these changes. We are talking about changes to the tax concessions for 0.5% of people with superannuation accounts. In 2025-26. So the policy won’t even kick in until after the election, and will be part of a future mandate the Labor government would be seeking.
So nothing changes now, and maybe something will change in a couple of years for those 0.5% of super holders, who have more than $3m in their retirement accounts.
For context, the average super account holds $150,000 (mine isn’t there yet). So this is not even something that most people would even have to worry about.
But because so much of budget talk when it comes to tax reform is a toxic cesspit, here we are. Dancing around about making changes for about 80,000 people – who will still get tax concessions, but maybe not as much. And who have more than $3m in their super accounts.
Here is Chalmers explaining the tax expenditure statement:
It’s important to understand what the tax expenditure statement is not. It is not a statement of government policies or even policy intent, it shouldn’t be read that way. It’s an honest reporting of the facts, what the various concessions are, who benefits from them, and how much they cost the budget.
We tried to be up-front in the our time in office about the challenges in our economy and in our budget. And I think people are pretty familiar with them by now. We inherited $1 trillion of debt that is getting more and more expensive to service as interest rates go up. We have persistent and growing spending pressures in health, defence, aged care. In the near term in the budget we’re doing pretty well from a combination of higher commodity prices, lower unemployment, and the beginnings of stronger wages growth. But beyond the next couple of years the budget pressures are intensifying rather than easing.
This is the mess that we were left and this is the mess we’re trying to clean up. And the announcement the Prime Minister has just made is part of that effort. Now, in the past week or so, there’s been a welcome debate about the sustainability of some of the more generous tax concessions in our superannuation system.
And what the tax expenditure statement shows is that the cost in revenue foregone from super tax breaks is about $50 billion a year. And that will surpass the cost of the aged pension as I said before, by around 2050. This debate or this part of the debate began when we released the proposed objective of superannuation, but making sure its purpose is to deliver a dignified retirement for working people. That’s what super is for.
Only 17 people have over $100m in their super accounts, says Albanese
Albanese goes on to explain the rationale behind the decision, including $2bn in savings to the government’s bottom line when it is operating on a full-year period.
Labor built the superannuation system and we have fought to keep it strong. But Australians who are having to make tough decisions around the kitchen table expect their government to be prepared to make tough decisions around the cabinet table.
And with 17 people earning over $100 million – having over $100 million in their superannuation accounts – the individual who has over $400 million in his or her account, most Australians would agree that is not what is superannuation was for. It’s for people’s retirement incomes.
Confronted with this information, it will be irresponsible to not take any action whatsoever. That’s why we’ve made this decision today. This reform will strengthen the system by making it more sustainable.
The savings that are made from the reduction in these tax breaks will contribute $900m to the bottom line over the forward estimates. And some $2 billion when it is operating on a full-year period.
Amy Remeikis
PM confirms timing of super reforms is ‘intentional’ for post the 2025 federal election
Good afternoon from Canberra – where, after a week of discussion, the government has announced where it is going on super.
And, as flagged by Paul, Murph and I over the last couple of days, the government will cap tax concessions for people with more than $3m in their superannuation account.
So instead of a 15% tax concession, it will move to 30%.
Here is how Jim Chalmers explains it in his press release:
From 2025-26, the concessional tax rate applied to future earnings for balances above $3m will be 30%.
This is expected to apply to around 80,000 people and they will continue to benefit from more generous tax breaks on earnings from the $3m below the threshold.
This adjustment does not impose a limit on the size of superannuation account balances in the accumulation phase. And it applies to future earnings – it is not retrospective.
This modest adjustment to tax breaks for the biggest accounts is expected to generate revenue of about $2b in its first full year of revenue after the election.
The 2022-23 Tax Expenditures and Insights Statement released today shows that the revenue foregone from superannuation tax concessions amounts to about $50b a year. The cost of these concessions is projected to exceed the cost of the Age Pension by 2050.
You might notice it is not coming in until 2025-26. That is AFTER the next election.
Anthony Albanese says that is intentional:
It’s after the next election. It’s also not retrospective. It applies to future earnings. Labor built the superannuation system and we have fought to keep it strong. But Australians who are having to make tough decisions around the kitchen table expect their government to be prepared to make tough decisions around the cabinet table.
‘99.5% of people with superannuation are unaffected by this reform’, PM says
The prime minister, Anthony Albanese, is now speaking in Canberra about the changes just announced to superannuation.
After acknowledging the anniversary of the Northern Rivers floods, Albanese says:
The cabinet has met this morning and had a discussion about superannuation. You may have noticed it’s been occurring over recent times. This Government inherited a trillion dollars of debt with very little to show for it.
Today I’m announcing that the earnings on super balances above $3 million will be a concessional rate of 30% rather than 15%.
This proposal does not change the fundamentals of our superannuation system. 99.5% of people with superannuation are unaffected by this reform. Under 80,000 will be impacted by this.
Importantly, this change will not occur until 1 July, 2025. You will have noticed that’s beyond this term. It’s after the next election. It’s also not retrospective. It applies to future earnings.
Government confirms tax changes to superannuation accounts with balances over $3m
Josh Butler
From 2025-26, the concessional tax rate applied to future earnings for balances above $3m will be 30%.
The change is expected to apply to around 80,000 people, which is 0.5% of the Australian population.
The 15% rate continues for balances under $3m.
Caitlin Cassidy
Queensland education union calls for urgent action following damning report on health and wellbeing in sector
A union representing more than 17,000 principals, teachers and staff across Queensland and the Northern Territory has called for urgent action to address the health and wellbeing of students and staff following a damning report into the sector.
The Independent Education Union QNT branch secretary Terry Burke said the summary findings of the latest Australian Principal Occupational Health, Safety and Wellbeing Survey reinforced the extent of the sector’s workload crisis.
The survey found the number of principals looking to retire had tripled in the last three years, broadly due to workload and a lack of time to focus on core duties.
Burke:
We see this in the burnout of our teachers and other school staff and the increasing rates of school refusal by students. We don’t have a teacher shortage – we have a shortage of teachers willing to work under oppressive workloads. Like teachers, our school leaders are forced to do too much work unrelated to their core duties, severely impacting their health and wellbeing.
Both government and school employers need to take urgent action on the issue of workload and work intensification in our schools by putting in place meaningful reforms to tackle the paperwork, red tape and obsession with data which are sucking the life out of our profession.
Andrews rules out pill testing
Benita Kolovos
Victoria will not follow Queensland in rolling out pill testing, the state’s premier, Daniel Andrews, says.
Speaking to reporters at Box Hill Secondary School, in Melbourne’s east, he claimed the service created a false sense of security for drug users:
I don’t think that we will be putting in place a pill testing regime because I don’t think that you can take these drugs at any level and be safe. Pill testing can often give people the sense that it is safe to take these drugs. And it isn’t. The pharmacology, the evidence, is very, very clear.
The Queensland government on Saturday announced it would introduce pill testing at mobile and fixed sites following the trials in Canberra.
The service would allow users to have their illicit drugs chemically tested for the presence of potentially dangerous substances and chemical compounds.
Peter Hannam
Retails sales rebound, trade surplus swells – will this mean 10 out of 10 RBA interest rate rises come next Tuesday?
Data out from the Australian Bureau of Statistics (ABS) points to the resilience of the economy.
First up, retail sales rose 1.9% in January, reversing part of December’s 4% retreat. (CBA had tipped January’s sales to rise 2.1%.)
Department stores did particularly well, with turnover up 8.8% for the month, when seasonally adjusted.
On the trade front, Australia garnered a $14.1bn current account surplus in the December quarter up from a revised $753m surplus in the September quarter. (Initially, this was reported as a deficit.)
The trade surplus reached $40.9bn, the second highest on record, the ABS said, with higher commodity prices helping.
The net primary income deficit fell to $26.4bn following the record-high deficit of $30.4bn in the September quarter.
Economists believe the fatter current account surplus will add 1.1 percentage points to the December quarter’s GDP growth (and make up for the 0.8ppt subtraction from the change in inventories, we saw yesterday).
We’ll get those GDP figures tomorrow.
Both the retail sales and trade numbers will be seen as positives for an economy absorbing a record series of interest rate rises.
Prior to today’s ABS figures, investors were lifting their expectations for how high the Reserve Bank will lift its key interest rate.
They are now looking at the equivalent of four more 25 basis-point increases to come.
The first of those will almost certainly come next Tuesday.
If so, that would be 10 rises in 10 RBA meetings.
Josh Butler
Liberal moderate Andrew Bragg calls for draft of voice to be released, warning it is ‘dead’ unless ‘no’ camp is convinced to change
Liberal senator Andrew Bragg warned the voice to parliament referendum is “dead” without a major increase in conservative support, claiming supporters were focusing on “convincing Australians who are already voting ‘yes’.”
“This will not be effective,” the NSW senator warned in a speech today.
Bringing all Australians to the table on the Voice is now urgent.
Bragg, a Liberal moderate and one of the opposition’s staunchest supporters of constitutional recognition for First Nations people, will give a speech to the Uphold & Recognise conference today – a gathering of constitutional conservatives who back the voice in principle.
He said that winning the backing of liberals and conservatives for the referendum “will be challenging but essential”, pointing out recent polling showing only 13% of Liberal voters supported the change.
The reality is, that the government needs to take liberal and conservative voters with them to succeed at this referendum. If only 13% of Coalition voters vote yes, the voice is dead.
In reality, at least 25% of Coalition voters will be required to vote yes if the voice is going to get up.
Bragg has called for a parliamentary inquiry into the referendum so that politicians can probe the proposed constitutional amendment and question. He repeated those calls in his speech, suggesting an exposure draft of the voice bill be released pre-referendum, but also suggesting a change in the overall campaign itself.
At the moment, a lot of the campaigning seems focused on convincing Australians who are already voting ‘yes’… We need to convince Australians who are on the fence or planning to vote ‘no’.
Bragg claimed this needed to include precise information about what the government “wants to achieve with a new power … We need to know exactly what is being proposed by the government of the day”.
I am concerned too few Australians can see how this new power will be deployed to help communities close the gap.
My view is that an exposure draft of the Bill or at least a detailed policy should be published by the government. This must set out how the voice will improve lives and help close the gap in communities.
Harvey Norman posts fall in interim earnings and dividend as consumer spending slows
Leading retailer Harvey Norman appears to be seeing the signs of slower consumer spending, but remains confident of withstanding any economic headwinds.
The company today reported a fall in interim profit, but said the result represented solid growth that was above pre-pandemic levels.
First-half net profit totalled $369.8m – down from $433.7m in the previous corresponding period – on total revenue of about $2bn, including $1.5bn of sales of products to customers.
After stripping out foreign currency items, and land, building and other asset revaluations, the attributable profit for the six months ended December was $390.2m, down from $461.4m.
Harvey Norman said in a statement:
Despite the macroeconomic headwinds and cost of living pressures affecting discretionary retail, our strong balance sheet and our substantial growth in net assets throughout the pandemic has left us in a solid position to withstand these challenging circumstances.
We remain confident in our brands and the strong market position held by our Australian franchisees and overseas company-owned stores.
Brands include Harvey Norman, Domayne and Joyce Mayne.
Harvey Norman declared an interim dividend of 13 cents per share, down from 20 cents in the same period in the previous financial year.
– AAP
Molly Glassey
The Guardian is turning 10! And we want to hear from you
Guardian Australia turns 10 this year and we would love to hear from our readers about what Guardian Australia means to them.
We want to hear from readers all over Australia and the Pacific – and we want to see you in the region where you live.
We are making a short video very similar to this one, which was made when The Guardian in the UK celebrated their 200th anniversary in 2021.
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