Anthony Albanese’s plan to impose a new tax on super balances above $3million is likely to hit more than five million young Australians by retirement and not just 80,000 people as Labor claims, new analysis shows.
The re-elected Labor government has the numbers with the Greens to get its Better Targeted Superannuation Concessions bill through the Senate when Parliament resumes next month.
For the past two years, Labor has been arguing its plan to impose a new 15 per cent tax on unrealised gains on super balances above $3million, before assets are sold, would affect the top 0.5 per cent of super savers or just 80,000 people.
This would take the headline tax rate to 30 per cent, as the new 15 per cent tax on unrealised gains, or the paper value of assets, was added on to the existing 15 per cent tax on earnings during the accumulation phase for all super accounts.
Controversially, Labor isn’t indexing it for inflation, arguing a future government could do so, like they periodically do for income tax rates.
Wilson Asset Management has done new modelling showing this failure to index the new tax would affect 5.4million Australians, aged 18 to 34, by the time they turned 67 and were able to qualify for the age pension.
‘All age cohorts under the age of 35 would be captured by the taxation on unrealised gains by retirement,’ it said.
The modelling showed Labor’s new tax on super balances above $3million, known as tax Division 296, would even affect young Aussies with a zero super balance now.
Anthony Albanese ‘s plan to impose a new tax on super balances above $3million is likely to hit more than five million young Australians by retirement and not just 80,000 people as Labor claims, new analysis shows
‘Our modelling indicates those aged 27 and under with a zero starting superannuation balance would exceed the unindexed cap before retirement,’ it said.
‘This has led to some characterising it as a “stealth tax”, one that fundamentally alters the long-term investment incentives within superannuation.’
A 19-year-old worker on a $54,088 salary, with zero super, would have $3.491million in retirement savings by 2071.
Someone who is 20 now on a $66,768 salary and just $75,000 in super now would $5.197million in superannuation by 2072.
Australians who studied longer before starting work would also be affected, with a 27-year-old worker with zero super, on a $90,315 salary now, like to have $3.098million in super by 2065.
A typical income earner, now 34, with $180,000 in super would $3.5million in super by 2058.
These Australians would face an annual tax bill in the hundreds of thousands depending how much their fund had growth during the previous financial year.
Wilson Asset Management Management founder Geoff Wilson said young Australians would suffer in decades to come.
Wilson Asset Management has done new modelling showing this failure to index the new tax would affect 5.4million Australians, aged 18 to 34, by the time they turned 67 and were able to qualify for the age pension (pictured is Sydney’s Royal Randwick Racecourse)
‘The proposed tax on unrealised gains will not merely be a burden on individual superannuation accounts exceeding $3million, the failure to index means a 25- year-old who today starts with a zero-superannuation balance will be captured by the time they reach retirement,’ he said.
Wilson Asset Management warned that forcing those with a self-managed super fund to sell assets, to avoid going above the $3million threshold, would discourage investors from backing technology start-ups.
‘The policy will constrict the flow of essential risk capital to the engine room of the Australian economy – our small and medium-sized enterprises (SMEs) and innovative start-ups,’ it said.
‘It is a policy that threatens to undermine the foundations of Australia’s economic dynamism by inhibiting the very companies that drive innovation, competition, and future growth.’
Wilson Asset Management has released a new discussion paper called, ‘Critiquing the Proposed Taxation on Unrealised Gains in Superannuation.’
AMP last month warned Labor’s plan to tax unrealised gains above the $3million threshold would affect the average 22-year-old worker in four decades’ time but Wilson Asset Management’s modelling shows the effects would capture workers aged 19 to 34 now.
Compulsory employer super contributions are rising to 12 per cent on July 1.
