Labor threshold above $3 million could affect more than half a million Australians: liberal senator

A liberal senator has warned that Labor’s planned tax on high retirement pension balances could ultimately affect more than half a million Australians.

Prime Minister Anthony Albanese announced this week plans to double the tax on super accounts over $3 million (US$2.03 million) from 15% to 30%. another federal election.

However, Treasurer Jim Chalmers said there are no plans to index the $3 million cap.

Labor has described this as a “modest” necessary change to support government spending, and between 2022 and 2023 Australia’s debt will drop to $36.9 billion (US$24.97 billion), or the country’s is estimated to increase to 1.5% of GDP in The tax proposal is projected to raise $2 billion to fill some of the budget holes.

The government says tax changes will currently only affect the wealthiest 0.5% of Australians, or 80,000 people.

Liberal Senator Andrew Bragg said “more than half a million people will be hit by this creeping tax” if tax thresholds aren’t indexed by retirement age.

“I think raising taxes is the last thing they should do and it sends the wrong message to people that the government will pull the carpet out from under you,” he told Sky News on March 5. .

“If changes are going forward, it’s better to be indexed.”

and Tweet Mr Bragg said on March 2 that the Labor government should “work for the Australian people, not for the superfund or the union master”.

How big will the new tax really be?

Indexing allows the $3 million cap to be adjusted for the long-term effects of inflation, cost of living, or input prices.

Modeling released by the Financial Services Council on 3 March shows that 204,000 Australians under 30 and 322,071 over 30 will reach retirement age, assuming inflation of 2.5%. By then, the $3 million unindexed cap at maturity will affect retirement savings. per year.

For example, if a 25-year-old IT professional earns $100,000 a year and their current super balance is $35,000, if they continue to make only minimal super contributions, they will be capped at $3 million by the time they retire at age 65. will exceed

A 25-year-old supercap today would be worth $3 million over 40 years with no additional contributions, or $919,671 assuming 3% inflation. At 4% inflation, her 25-year-old, who currently invests $624,867 in supermarkets, would be affected by Labor’s tax proposals without needing to make any further investments in supermarkets.

Financial Services Council CEO Blake Briggs said: press release Unindexed retirement caps “call into question intergenerational equity.”

“The upper limits of the old-age pension scheme are indexed to ensure fairness across generations, so each generation can get the same results and benefit from the old-age pension scheme.”

“The 500,000 Australians affected are more than six times the current government estimate, which now considers only balances over $3 million.”

Meanwhile, the parliamentary budget office’s cost calculations project that the new supertax will affect 210,000 Australians and return $54.6 billion to the budget’s revenues over the next decade.

The new tax bill has been put forward even though Labor had previously promised not to make any major changes to the Superfund during the election.

But Chalmers defended the superannuation tax, saying changes would be made if Labor were re-elected in 2025.

“Our job is to take budget challenges seriously, take economic challenges seriously, make the right decisions, and recognize that the right path is not necessarily the path of least political resistance.” he told reporters in Brisbane. Sunday.

“The $3 million threshold before the tax rate on income is raised is the threshold that most people will have for years to come and have a proper retirement,” a spokesperson for the treasurer told AFR on March 3. “There’s more than enough to do,” he said, adding that “nothing can stop the future.” With some political persuasion the government decided to raise the $3 million threshold. ”

The Epoch Times has reached out to opposition leader Peter Dutton for comment on how the coalition will approach the budget.

Neil Angus, a former Liberal MP from Victoria, said in a recent commentary for the Epoch Times that the federal Labor government is “looking at the budget issue in the wrong direction. Spending.”

“Many Australians can easily identify examples of excessive or irresponsible federal spending, such as the periodic cost explosions of major infrastructure projects,” he wrote.

Do Workers Tax Unrealized Capital Gains?

The Labor government has yet to clarify whether the new superannuation tax will be calculated on unrealized capital gains.

Introducing an unrealized capital gains tax would mean taxing people on the increase in the value of their property, even if it wasn’t sold.

and interview On Friday, Deputy Prime Minister Richard Marls was unable to provide a definite answer on whether this was the case when asked three times.

Bragg told Sky News, “The government has not been outspoken with people about how it will handle unrealized gains and whether it applies to the five ministers who have defined benefit schemes. I didn’t speak frankly about it,” he said.

In the United States, President Joe Biden has proposed an income tax approach that would tax households worth $100 million or more on unrealized capital gains as part of his “Billionaire Minimum Income Tax.”

In America, President Joe Biden Proposed As part of his “Millionaire Minimum Income Tax,” an income tax approach would tax households worth $100 million or more on unrealized capital gains.

A tax increase, proposed by Senate Democrats in 2021 and by Biden himself in the 2022 White House budget proposal, failed to garner enough support, but it would have to be added to “total income,” which includes regular income and income. A minimum tax of 20% will be imposed. Both realized and unrealized gains.

Centrists such as Senator Joe Manchin (DW.Va.) opposed the policy, saying it would generally discourage private sector activities that support economic growth, such as savings and investment in new ventures. rice field.