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Australia Institute backs ‘much needed’ $3m super tax

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By Keith Ford
January 22 2025
3 minute read
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While the controversial measures have received little support in the Senate, the think tank has argued Division 296 would “make the nation’s super system fairer”.

When the $3 million super tax legislation was shelved in December, the SMSF sector greeted the news with cautious optimism.

SMSF Alliance principal David Busoli, for instance, said the shelving of the Division 296 tax was indicative of serious concerns held even by those in favour of its stated underlying objective due to its fundamentally flawed design.

 
 

“There was little about this matter that reflects favourably on the government. It was announced as an equity measure targeting members with $80 million in super but released with a $3 million, unindexed target,” Busoli said.

“It demanded a second consultation period after the first was so demonstrably inadequate but virtually all recommendations were arrogantly ignored, even those concerning fundamental drafting errors.”

However, the measures have refused to stay buried, and there is little indication that the Labor government plans to scrap the changes altogether.

Adding fuel to the fire this week is public policy think tank the Australia Institute, which said the stalled changes “would make the nation’s super system fairer, at a time when so many Australians are doing it tough”.

“The vast majority of Australians can only dream of retiring with a super balance of $3 million. Most people end their working lives with just a fraction of that,” it said.

“While the superannuation system has enabled the likes of farmers and small business owners to place assets such as farms and properties into their super, the number of those who do that is small and most – if not all – do so as a way of reducing the amount of tax they pay.

“This is not what the superannuation system was designed to do.”

Pointing to Treasury estimates that show concessions on superannuation earnings and contributions hit $51.7 billion, the Australia Institute said that if the government was able to secure crossbench support on the measures, “all Australians would be better off”.

“The government’s proposal to reduce the taxation concession on balances over $3m is a much-needed reform to Australia’s superannuation system,” said Greg Jericho, chief economist at the Australia Institute.

“The proposed changes would affect only 80,000 of the around 17 million people with a super account.

“This financial year the richest 10 per cent will receive just over $20 billion in superannuation taxation concessions. This is at a time when around 23 per cent of Australian retirees end their working lives in poverty, compared to 11.1 per cent in Sweden and 3.8 per cent in Norway.

“Superannuation tax concessions are designed to encourage people to save and reduce dependency on the age pension, they are not designed to be used by the very wealthiest in society to avoid paying tax.”

Speaking on the SMSF Adviser Show, Smarter SMSF chief executive Aaron Dunn said the survival of the Division 296 changes is heavily dependent on whether or not the government calls an election before the federal budget that is slated for March.

“First, quite clearly, we've seen both sides of Parliament move into election mode. That’s one thing, and we've seen announcements already start to occur,” Dunn said.

“What we have heard Labor discuss is they remain committed to introducing an additional level of tax, as we know it Division 296 tax, which in its current form, under the current government, it seems like it has been defeated.

“Yes, there are some further sitting days, but unless they can get three crossbench senators, which at this stage appeared unlikely, it feels like it's dead and buried.”

However, he said this will only continue to be the case until the upcoming federal election has been decided and a government has formed.

“If it’s the Labor Party, they remain resolute to look to introduce such a measure. Now, that will then depend upon it being reintroduced and then whether there is a minority government in the House or majority, and therefore who controls the Senate as well.

“So, there's a lot of balls in the air when it comes to this particular measure. The likelihood is our 1 July 2025 start date is dead and buried. It seems unrealistic but it doesn't mean that this legislation is dead and buried because it will be dependent upon who takes government and in what shape they take government.”

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Comments (5)

  • avatar
    I wonder why 23% of Australian retirees end their working life in poverty? Surely it will have nothing to do with smoking, drug use, drinking, gambling, piercings, tattoos, etc. Nothing will change whether you have Div 296 tax or not.
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  • avatar
    Pray tell how it “would make the nation’s super system fairer"?  Oh yes... the usual...  Take from those that are deemed to have more than enough to waste.  Hard-working, aspirational Australians will be hit very hard if this tax sees the light of day, with the theft of life-time savings for yet more government waste.  This is the real reason why Australians are struggling with the cost of living and many of those that will be hit by this tax are also struggling.  I am one of them. 
    I hear people around my age now saying that they wished that they had saved more for their retirement as they did not put extra aside.  I did put extra aside and can't yet touch it, but I do not want to have to alter my lifestyle when I retire and this is why I worked so hard and why I sacrificed, to be in the financial position that I wanted to be in and not have to worry.  I will never be eligible for a pension and I am happy about that as I wanted my financial independence, enough to give up plenty during my working life. 
    The Institute fails to understand that we need people to save for their own retirement which then reduces the need for the Aged Pension.  The concessions encourage people to save more for their own retirement.  Instead of trying to steal life-time savings, why not get the word out there of the benefits of saving and sacrificing instead of living for today. Then the Aged Pension will be there only for those that really need it, which is the whole point of social welfare.
    This Bill is stuck in the Senate because it is grossly unfair, even if only to 17000 Australians.  I dare say many more will be affected, quickly. It is unconscionable that Treasury is trying to get it through basically unchanged from when they proposed it.  They should be embarrassed and ashamed of themselves for even letting it see the light of day in its current form.  I am personally embarrassed that we have a Treasury such as this. They are either, for want of a better word, stupid for not seeing the issues, or callous because if it is quite deliberate.
    BTW - someone please work to do something about the NDIS.  Australians can't afford the current system.  I am very upset about websites that were advertising Christmas stocking-filler gifts for sale under the NDIS... This is so wrong.  Gifts that everyone else had to purchase themselves.  It is a rort in many cases and not being used as it was intended.  We wouldn't be having this cost of living crisis if not so much was being drained out of the public purse.
    Stop the waste and lets get this country moving again please. 
    Sorry for the rant but this Institute is not living in the real world.  I am over the Canberra bubble of lefties that pillage all the way through.
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  • avatar
    Nothing fair or equitable about the taxing of unrealised gains, which is what this proposal does. There has been a lot of reform to reduce super benefits, contribution caps, transfer balance limit etc. Some may have gone a bit too far in how they will affect young people just entering super now. While further reform may be justified this Div 296 is definitely not justified in its current form.
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  • avatar
    I just had a quick look at The Australia Institute website.

    They also seem pretty enthusiastic about the abandonment of the promised stage 3 tax cuts - a move that entrenched bracket creep and diminished ambition into our tax system for another decade.

    So supporting the new egregious super tax is a bit predictable.

    Perhaps these 'think tanks' could direct their cerebral might to addressing our collapsing productivity - which remains unaddressed and at the heart of our problems.

    1
  • avatar
    john@**************.com.au Wednesday, 22 January 2025
    I think the left-wing nut jobs at the Australia Institute should sit this one out. 
    1
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