A cap on super balances remains possible under Labor

The Albanese government has left the door open for a cap on super balances amid claims that many are using super as a wealth creation tool.

In response to a suggested $5 million cap on balances, financial services minister Stephen Jones said: “If you’ve got massive retirement balances in a superannuation fund, it’s pretty hard to argue that that’s for retirement income.”

Super Consumers Australia’s director Xavier O’Halloran also says a $5 million cap would be appropriate.

“We’re seeing people passing away with about 90 per cent of their retirement savings still intact. So this is beyond saving for retirement and more into creating quite significant wealth inequality for a certain portion of the population,” he said.

Read: Budget of no surprises aims to drive down inflation

Call for a cap on super has been growing for some time

In a pre-budget submission last year, the Australian Super Funds Association (ASFA) recommended that “those members aged 65 or older with a total superannuation balance as at 1 July 2022 in excess of $5 million, whether in accumulation, pension phase or a combination, could be required to withdraw the excess out of superannuation.”

The Morrison government did not heed that recommendation. The Albanese government has not ruled out such a move, but it, too, is yet to act. Jim Chalmers’ first Budget made a number of announcements that will affect super members. A cap was not among them.

Many believe it’s past time for a cap, including some retirees who will lose out.

Nigel and Lyn Rickman live a comfortable retirement on a small farm in regional Queensland. Much of their comfort derived from $65,000-a-year earnings on their self-managed super.

Read: What’s in the October Budget for older Australians?

Under current rules, not one cent of that $65,000 is taxed. Nigel Rickman appreciates the advantages he and Lyn receive.

“The present system is favouring us and those above us greatly,” said Mr Rickman. “Clearly, the government needs to provide services to all the people and why should we get a free run?”

Mr O’Halloran believes greater equity could be achieved through a cap, or with a progressive taxation scheme.

Read: Big Age Pension and welfare boost in budget planning

Not everyone shares this view. Financial Services Council CEO Blake Briggs says any such changes would undermine confidence in super.

A cap on super may be very attractive to a government searching for savings

According to a model prepared by Delta Pearl Partners, the government could raise $8.5 billion a year with the introduction of a $5 million cap, along with reducing the $27,500 concessional contribution cap to $15,000, lowering the division 293 tax threshold from $250,000 to $200,000, and applying a flat tax of 15 per cent on all retirement earnings.

For now, though, the status quo remains, as Labor’s October Budget is very much a “bread and butter budget”, as described by Dr Chalmers himself, focused on driving down inflation. Would you support a cap on super balances? How would it affect you? Why not share your thoughts in the comments section below?

Andrew Gigacz
Andrew Gigaczhttps://www.patreon.com/AndrewGigacz
Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.


  1. That comment : “The present system is favouring us and those above us greatly,” said Mr Rickman. “Clearly, the government needs to provide services to all the people and why should we get a free run?” I find hard to believe. To be receiving their $65000/year. Rick & his wife must have around $810,000 each in their SMSF. They worked, paid taxes & saved that money for their own retirement. They are self supporting. I think it is a silly statement . . . if he really said it.

  2. There really should be a cap on the balance in superannuation, and a progressive tax threshold on income in retirement phase starting at $60,000pa per person. I cannot believe anyone ‘needs’ more than that.

  3. Every time Labor gets in power we see the politics of envy. We certainly don’t have a lot of super nor are we likely to have any more but we don’t begrudge those people who have worked hard and can put aside money in a super fund. Good luck to them. There are many ways that wealthy people can avoid tax and super is but one. Instead of putting a cap on super, why not tax the amounts added over a certain figure, in this article $5m?

    It’s a bit rich for MP’s to want to muck around with the super funds of voters when they have a non-contributory super fund at 15% when taxpayers current rate is 10%.

  4. Retiring with $5 million in super is with a 5% withdraw rate is $250,000 a year and with the current tax rates most if not all is cash in hand.
    The 5% is required withdrawal amout stipulated by the government.
    Those with the maximum superannuation would have other money elsewhere to call upon as well.
    Just looking at the $5 million drawn down at $250k a year would last 20 years without any earnings. As this would mean the retiree would be well into their 80s, which is the average life span, shows this is way more than most would require and the chance to be able to spend each year would be hard.
    A more sensible maximum would be $3 million and this could be drawn down at over $100k a year and last 30 years, with an increase in principle due to interest payments. This would still be a very comfortable retirement.

    • Ummmm . . not quite right . . . the current withdrawal amount is 4% (this year 2% due to covid), then it increases to 5%, 6%, 7%, 9%, 11% & finally 14%. Seems the gvt doesn’t want any left for inheritance.

  5. I don’t like this tax dodge. It’s unfair on others.
    What ever they do with changes should encourage people with smaller balances to save. I’d say anyone with under 1.5 million. And deposit what ever they can without restrictions. After that Monday should be outside superannuation.
    It’s not tax effective for me to save into superannuation. My tax rate is 30%. Accountant advised hardly worth putting in superannuation. Of ie as on high tax bracket it would be a great Move.
    I think superannuation should be redesigned to help the strugglers set themselves up for retirement. So pension is not needed as often as is at present.
    Not the rich who will not get pension anyway.

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