Treasury released its mid-year update yesterday with figures revealing the changes to the $3 million super tax legislation and the low income super tax offset are projected to generate $2.2 billion less in 2027-28 and $650 million less in 2028-29.
The first draft of the legislation released more than two years ago, and which failed to pass into legislation earlier this year, was expected to add $2.3 billion to the government’s coffers in its first full year of operation in 2026-27 and $40 billion over a decade.
After vocal and persistent pushback from industry associations and business leaders, the government removed its plan to tax unrealised gains from the legislation and added indexation. It also introduced two thresholds – $3 million and $10 million – from which additional taxes would apply.
The second draft of the legislation, which has still not been tabled in parliament despite assurances that it would be presented prior to Christmas, is expected to raise about $2 billion over the forward estimates, compared with the previous gain of $6.2 billion under the original policy.
In the first week of December, during Senate estimates, it was stated that the Parliamentary Budget Office estimated that the revised policy will now only raise $25.3 billion over 10 years compared with the $40.8 billion in the original draft.
Dr Shane Johnson, first assistant secretary tax analysis division for Treasury, stated in Senate estimates that excluding the LISTO change, the amended superannuation policies are expected to generate revenue of over $2 billion over its first year of operation.
Peter Burgess, CEO of the SMSF Association, told SMSF Adviser that even with the higher tax rate for balances above $10 million announced in October, it only applies to a small group, so whilst it is expected to increase the rate at the top end, it is unlikely to fully replace the revenue from the government’s initial policy to tax unrealised capital gains.
“With the MYEFO 2025-26 released yesterday, as expected, Treasury has updated the revenue numbers to match the government’s announcement in October on how this tax is expected to apply. Indexing the thresholds and taxing real earnings makes the system fairer and more predictable, but it also meant revenue estimates needed to be updated,” he said.
“It is now critical the government releases the exposure draft as soon as possible. With the legislation unlikely to pass before the end of February, members and their advisers would have less than four months to understand how the tax works and respond appropriately — an unreasonably short timeframe for a measure of this complexity.”
Treasurer Jim Chalmers said yesterday the changes to the superannuation legislation will generate a $435 million to boost the low-income super tax offset.
“The figures … show a stronger budget position since the election, and a much stronger budget since we came to office. In fact, this is the only mid-year update since they began in the mid 90s to have a combination of these three features simultaneously a better bottom line each year of the forwards, less debt every year of the forwards, and net policy decisions that improve the bottom line on this combination of measures,” Chalmers said.
“This is the most responsible mid-year update on record. In our first term, we delivered the biggest nominal improvement in the budget ever that included those two surpluses and a much smaller deficit last year, and today we build on that very substantial progress.
“This year’s deficit is now $5.4 billion smaller. The budget is $8.4 billion better than it was at the election. It’s better every year of the forward estimates. It’s $233.5 billion stronger since we came to office. Gross debt this year is $28 billion lower than at the last election. It’s $176 billion lower than forecast at the election before that, gross debt peaks at 37% of GDP.”
