Treasurer Jim Chalmers has been forced into a humiliating backdown on his superannuation tax plan, after Prime Minister Anthony Albanese overruled him. The government will now scrap the proposed tax on unrealised gains and instead tax only realised gains, while indexing thresholds to prevent bracket creep.
The original plan, which would have taxed paper profits on super balances above $3 million, was widely criticised by economists and industry experts. Critics argued it would force retirees with illiquid assets to sell investments to pay tax on gains that may never materialise. Chalmers had repeatedly insisted the policy would not change, but the PM stepped in to correct the course.
The revised policy will impose a 30% tax on super earnings for balances between $3 million and $10 million, rising to 40% for balances above $10 million. Indexation will apply to the thresholds, preventing a slow tax rise over time. The Greens had pushed for the 30% rate to apply above $2 million, but Labor has not adopted that proposal.
Credit for the backdown has been given to Assistant Treasurer Daniel Mulino, a Yale-trained economist, and Cabinet Secretary Andrew Charlton, an Oxford economics PhD. Both are understood to have advised the PM against the original design. Chalmers now faces questions about his judgment, having defended the flawed policy for two years before being overruled.
