In a keynote address to The Australian Financial Review’s Super and Wealth Summit, Assistant Treasurer Stephen Jones said the top 10 per cent of superannuation accounts receive over 40 per cent of the current earnings concessions.
He said in the past week the ATO revealed there were 42 SMSFs with assets over $100 million.
“No one is decrying that success, but you’ll have a hard time convincing me that these accounts need their current level of taxpayer support,” he said.
“Strengthening the [superannuation] system also means that we need to ensure it reflects society’s expectations around fairness.”
However, speaking to SMSF Adviser, Peter Burgess, SMSF Association CEO, argued that there are more than 600,000 SMSFs and the focus on ’megafunds‘ is more of a political witch hunt than a true reflection of the sector and its members.
“As we have said before, there are a number of ways the government could reduce the superannuation tax concessions for those with excessively large superannuation balances and the solution, which is currently before parliament that taxes unrealised capital gains, is not the answer.”
Super concessions to exceed age pension
On Tuesday, Minister Jones said the cost of superannuation concessions will exceed the cost of the Age Pension by the 2040s.
“We think it is a fairer outcome if we modestly reduce the tax concessions for some of these accounts with very high balances. We’re not capping how much can be held in superannuation,” he said.
“And the tax concessions will still be generous for everyone, but budgets are about trade‑offs. If you think the current tax concessions are appropriate, you will need to find those savings by cutting services somewhere else.”
The government’s superannuation policy agenda is comprehensive, he said, but it needs to be bound together by the proposed objective of superannuation.
“[The objective of superannuation is] that savings would be preserved to deliver income for a dignified retirement – alongside government support – in an equitable and sustainable way.”
“We are committed to a system where every dollar of super is paid. A system that maximises performance, and a system that puts the member’s needs at the centre. This is the vision for better retirement incomes for all Australians.”
Regarding financial advice reforms, Minister Jones said the financial advice laws in Australia are not “fit‑for‑purpose”, stating that advice is too expensive, too hard to access, and too “strangled by red tape to be helpful”.
“Treasury analysis shows around 50 per cent of [superannuation] accounts have a balance of at least $100,000 in the year before a person’s passing, but worse still if members cannot get advice from regulated sources, they may be led by ‘finfluencers’ and ‘armchair’ commentators to expose themselves to the dangerous world of scammers.”
“No one can defend the current financial advice laws when presented with these outcomes. This is an acute challenge for the superannuation industry.”
He said the government has set out to implement the most significant reforms to financial advice laws in a decade and is committed to improving the retirement phase of superannuation.
“The foundation stone for this project is helping more Australians access quality and affordable financial advice. We have delivered the first tranche of reforms, and the next tranche of reforms is being drafted and prepared for introduction.”
“In this tranche of reforms, we will modernise the best interests duty and remove the safe harbour steps. We will reform statements of advice so that they are actually usable by the consumer who paid for it to make informed decisions, and we will create a new class of advisers who will be able to provide simple and safe advice.”
Agreed Kym – this politician is simply oversimplifying deliberately. He simply just wants the money of hardworking, sacrificing Australians that already pay the bulk of personal tax revenue. By creating a law, instead of stealing it (as a Communist regime might) he can take it with the blessing of whoever the politicians are that back this egregious tax if it becomes LAW.
The super system already heavily taxes extra contributions going in to super so there is a bit of an issue adding taxes on the way out. It was designed to tax savings going in only. As I understand it, a system that taxes on the way in should not be taxing on the way out and vice versa.
It is OK for the industry and retail funds to spend hundreds of millions of dollars each year for marketing and to pass on to unions (which then it seems passes monies on to the Labor party for their election campaigns) but they can’t change their software to properly calculate the actual earnings per member account? This is why the whole stupid formula was created in the first place.
The Labor government quite obviously had consultations in the first place with these funds and that is why the treasurer then presented this formula to the general public, with the blessing of the those funds. They have barely changed the formula or any of the definitions since it was announced and they use just 42 SMSFs as justification for other funds with several million dollars of savings (mostly through capital gains good fortune I would hazard to guess), so it is very clear to me that there was an ongoing consultation process with these retail and industry funds first and to hell with the SMSFs.
Labor always loses the plot since Hawke and Keating and they are always left to lick their wounds when they get kicked out usually because of the class warfare game they play that then backfires on them. This formula will lead to a taxing of more than triple for my partner and myself personally, sometimes well in excess of personal rates of tax because of it including the tax on paper profits. I know that it will be significantly higher for those 42 SMSFs because of the proportioning in the formula. I anticipate that in some cases, the tax will outstrip physical annual taxable income for larger funds, some even below the $100m of those 42 funds.
BTW – in Sydney $3m is a drop in the ocean for life-savings for those with high income needs to service the lifestyle that they currently enjoy and that was carefully planned to be continued into retirement. Aspiration is dead to the current Labor party. The thing is, its these very individuals that pay for everyone else’s retirement needs.
These statements by Jones just further confirm his complete lack of understanding of the portfolio he is charged with. Despite all the advocacy and consultation, public submissions and blogs, he still doesn’t get that it isn’t the tax on super that is at issue, it is the flawed design of the calculation of the taxable earnings. You are left to conclude that his willful ignorance to address the objections raised, albeit they have been consistent and in no way include the usual ambit claims that emerge during consultations, is confirmation that this was always political, with no intention of making good policy. Many in the industry have been calling for broad based tax reform but if you stick with just super, there are plenty of methods to make it work better from a tax perspective. There are existing settings that could be adjusted without the need to introduce a new tax. There are 3 tax points in super: the contributions stage, the accumulation stage and the de-accumulation stage. Somehow, a tax for higher earners was able to be applied to the contributions phase. The accumulation phase is a real problem for policy change due to the intractability of the large funds and their systems. Any changes are a big deal for them and they have a very loud voice, particularly with a Labor government. Don’t expect any changes on fund earnings tax any time soon. So then there is the de-accumulation phase. Many in the industry have suggested the re-introduction of tax on pensions with rebates for low income earners. Seems to make a lot of sense – easy to implement and would capture individuals that have high super balances.
But, it does feel like a waste of time trying to add constructive alternatives, this Minister is stubbornly, willfully, driving a simple political message and ensuring the social divide in the country is wedged further apart
It is the height of duplicity to reference 42 funds with over $100m as justification for imposing a new tax on members with a $3m balance.
I would like to personally thank those 42 SMSFs that have so much in superannuation that they likely pay over $1m or much more in tax from their SMSF each year (excluding any other tax that You may pay, which is likely also very substantial).
You and any other person in the top 10% of earners collectively paid more than 46% of the tax take in 2020-2021 (as per AFR (article July 17th, 2024 by Michael Read and Tom McIlroy) as released by the ATO. It makes perfect sense to me that You received 40% of superannuation concessions. You received those superannuation concessions and yet still paid 46% of the tax take from personal revenue (perhaps your concession should have been more like 46%).
You (the top 10% of earners), are all the backbone of this country. You are the people that pay for the bulk of our hospitals, roads, rails, schools, NDIS, old-age pensions, politicians, public servants and far more. You are likely the same people that will be independent of the other tax payers in your old age as You will not require our financial assistance. You are the people that were encouraged by the Labor party of Hawke and Keating and the Coalition of Howard and Costello to be more than You ever thought that You could be, and through your personal endevours and sacrifice, this country is far richer, as are each and everyone of the 90% of the rest of us. Without You, we would not be who we are today. And we need You still. In fact, we need more people like You.
I understand that the Ministers Stephen Jones and Jim Chalmers know perfectly well that this so-called 15% added tax is a much higher impost upon you than they are letting on the general public. I know that the tax take can be the equivalent of up to 70% tax on taxable income of your SMSF if their “modest” tax reform is passed. I understand perfectly that this is a tax on paper profits that may never materialise. I understand that You will be made to pay tax on an unrealised capital gain and then have to pay tax on the realised capital gains – likely, a double taxation on the overall capital gain in most cases.
We need a government that will inspire all of us to be aspirational. We need to be encouraged to start lifting our productivity which has nosedived in the last few years.
We appreciate and encourage the likes of You who give so much to our tax system, allowing us to give in other ways. Yes, it is You who allows us to be able to give back in other ways, for example, as volunteers and nurses, paramedics, police officers and teachers. It is You who help us when times are tough or jobs are scarce through numerous pensions that are available to us – it is all thanks to You! It is not the government that gives us all of this. It is You! And I, for one, thank You!
It is the government’s job to not waste your very valuable contribution to society. It is their job to encourage You to continue to contribute, but fairly, not egregiously (a 40% tax concession in return for 46% tax take seems more than fair to me). And it is their job to inspire others to be more like You.
Thank You!
The people being subjected to additional tax on their retirement savings are also:
[1] Those who will never have any chance of getting any Age Pension.
[2] Have already paid more income tax than probably 90 to 95% of the population.
[3] Remain subject to the same contribution limits as everybody else.
The legendary and fictional Robin Hood was of course an outlaw and a thief.
This would be an appropriate “nickname” for Stephen Jones as he keeps on “robin’ us” and “pulling the hood” over his outrageous socialist policies.
It might be a fair reduction in superannuation tax concessions, except unrealised capital gains are being tax, all capital gains (realised & unrealised) will effectively be taxed, after CGT discount, the same as the top marginal rate of tax of 47% and not everyone who has a large balance can remove the excess as they can’t meet a condition of release.
The tax increase will only be modest compared to the cost of the PM’s flight upgrades.
If taxpayer support is a concern, have a look at what you pay unionised labour on all of the government projects and staff…..really?!?!?!?