Jim Chalmers drops unrealised capital gains tax on high-value super accounts
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More news: The Tech Council has welcomed Treasurer Jim Chalmers’ amended superannuation changes, describing the reversal as “great news for Australia’s venture capital ecosystem”.
In a statement on Monday, TCA chief executive Damian Kassabgi said the U-turn will provide “much-needed certainty” for investors looking to back early-stage innovation in Australia.
Kassabgi singled out the reversal on unrealised capital gains as “especially important”, stressing that many venture funds had up to a third of their portfolio supported by self-managed super.
Meanwhile, Opposition treasury spokesman Ted O’Brien described Chalmers’ announcement as a “humiliating backflip” on his plan to tax unrealised gains.
O’Brien said the treasurer had spent two years “defending the indefensible”, but warned he is “no doubt cooking up all sorts of new taxes” to fill the hole left by the amended proposal.
“No amount of spin from the treasurer hides the fact that this is a full knock-down rebuild of an utterly failed policy,” O’Brien said.
“We await the final details of the new policy, including how it will operate and who will be affected.”
What they said: “[This is] a sensible outcome and great news for Australia’s venture capital ecosystem … [which] will provide much-needed certainty for investors backing early stage innovative Australian companies,” Kassabgi said.
“Government policy should also play a role in encouraging our major super funds to invest in long-term, high-performing sectors such as tech.”
Paul Keating welcomes Chalmers' super U-turn
More news: Former prime minister Paul Keating, the architect of superannuation, has welcomed Chalmers’ revised plan as sharing “substance with necessity”.
In a statement on Monday, Keating attacked successive governments for “conveniently overlooking” needed reform to the system, which he said the Howard government had turned into a “runaway scheme”.
Keating said the Howard government cynically turned superannuation into a “capital accretion scheme” by lifting the ‘reasonable benefit limits’ to win votes in 2007.
But the former prime minister praised Chalmers for “leading the work” in bringing the scheme back under control.
What they said: “[This] is a reform of a kind that shares substance with necessity. Necessity every government since 2007 has conveniently overlooked or simply regarded as too difficult,” Keating said.
“These decisions solidify superannuation tax arrangements in a manner the community can now rely upon for the long-term security of their retirement savings and with it, their peace of mind.”
'Slap in the face': Greens concerned despite Chalmers' super backflip
More news: The Greens are yet to commit to Treasurer Jim Chalmers’ altered superannuation plan, despite his major backdowns on key demands.
In a statement on Monday, Greens economics spokesman Nick McKim said the party would review the changes but was concerned Labor had “further weakened” its proposal.
While welcoming alterations to the LISTO, McKim said the removal of a tax on unrealised gains and keeping the threshold at $3 million showed Labor did not have “the guts to tax big corporations and billionaires fairly”.
The Greens had been pushing for the threshold to be lowered to $2 million.
McKim’s comments put a cloud over the plan’s prospects of passing the Senate, within an hour of Chalmers telling reporters he had held a “constructive” initial conversation with Greens leader Larissa Waters. Asked whether he was confident the Greens would back the changes, Chalmers said he would not pre-empt their decision.
The Greens hold the sole balance of power in the Senate, meaning they have the ability to veto Chalmers’ proposal as the treasurer is not negotiating with the Coalition.
Announcing the changes, Chalmers was repeatedly forced to deny he had been rolled by Prime Minister Anthony Albanese, whose office reportedly intervened in the contentious policy.
Chalmers had repeatedly ruled out changes to the scheme but, announcing indexation on Monday, insisted that option had always been in the government’s “back pocket”.
What they said: “This is a capitulation to the wealthiest people in the country, and a slap in the face to everyone else who pays their tax straight out of their pay packet,” McKim said in a statement.
“We’ll look at the full legislation when it’s introduced, but this backflip shows Labor’s priorities loud and clear. They’d rather protect the wealthy few than stand up for the many.”
Jim Chalmers drops unrealised capital gains tax on high-value super accounts
The news: Treasurer Jim Chalmers has announced a drastic change to his controversial plans to tax unrealised gains in $3 million plus superannuation accounts and a raft of other alterations.
The context: The biggest change is to scrap the taxes on unrealised gains, with the change only to be applied to realised gains. This was the most criticised aspect of the Albanese government's plan to shift the concessions in superannuation to make the system fairer and more sustainable.
He has introduced two thresholds for his better targeted superannuation tax concessions, $3 million and $10 million. The rate is 30% for those under $10 million but over the lower threshold and is 40% above that point. Chalmers said this “is still a concessional tax arrangement but it’s better targeted”. Both of these thresholds will be indexed “in order to get it through parliament”.
The changes also include increasing the low income superannuation tax offset to $810 from $500 and raise the eligibility cut-off to $45,000 from $37,000 in 2027. This is in line with the third income tax cuts.
The changes will be delayed by an extra year, to 1 July 2026 with the exception of the low income offset (LISTO) changes, to provide more time to consult and get the changes sorted.
Federal judges will also have a shift to ensure there is “better aligned treatment” when it comes to their defined benefit interests.
The changes were recommended to the Expenditure Review Committee on Friday and to Cabinet on Monday and were agreed with. Chalmers has run the changes past the Greens but did not provide details about the response.
The numbers: The LISTO changes will cost an extra $435 million over the forward estimates. The changes overall will have a cost of $4.2 billion to the budget, which the government says is largely due to the year long delay.
What they said: "It will raise a bit less than the original proposal but it will still make the superannuation system or fan and stronger and more sustainable and that is our objective," Chalmers said at the press conference.
"We found another way to deliver on our objectives by working through the issues in our usual incident and methodical way and that is what we are announcing today."
He said that he does accept this is a change to the proposal he made two years ago, which he has repeatedly said the government was given a mandate to deliver.
The source: Jim Chalmers press conference and media release
