Super bad
The fierce debate over Labor's super tax changes shows just how difficult it will be for Labor to enact economic reforms — even after its thumping victory.
An issue that barely featured during the federal election campaign and was announced more than two years ago is consuming almost all of the oxygen in its aftermath. The furore over Labor’s plans to tax unrealised capital gains in super funds with balances above $3 million is growing, but also seems at odds with the landslide victory and mandate it just won.
Today, we published a deep dive on how the increasingly contentious policy came together by Jennifer Duke. As she reported, the plan is the product of extensive policy work, and alternative options such as taxing actual gains in super funds with large balances were assessed but discarded as too complicated and onerous.
At its core, Labor's proposal is built around its belief that the purpose of superannuation should be to fund retirements, not to provide a mechanism for the wealthy to shield their assets from tax. Treasury has estimated that concessions on super funds will soon hit $50 billion and by 2050 exceed the cost of the age pension. For a government facing a deteriorating budget position (and unwilling to cut spending), super is an obvious place to look for savings.
None of this is to say that the policy is perfect, of course. As I wrote last week in this newsletter: “Taxing paper gains that may never result in actual profits is a crossing of the rubicon moment, and a genuinely bad idea.” But some of the commentary surrounding it has veered into alarmist territory.
