More wealthy Aussies reaping benefits of super tax concessions

Rich man smoking a cigar

The purpose of superannuation, according to the Treasury is “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”

Superannuation is not meant to be a tax haven for wealthy individuals. But significant tax advantages in super are being enjoyed by more and more Australians.

The latest figures from the Australian Tax Office show that 11 more Australians – now 28 in total – have super balances of more than $100 million.

The 2020-2021 data also shows there are now 135 people with more than $50 million stashed in their super accounts – an increase of 107.

The average super balance for Australian men aged 60 to 64 is $322,200 and for women of the same age it is $246,900. The average balance across all ages increased from $150,000 in 2019-20 to $170,000 in 2020-21, according to the ATO.

The latest figures add fuel to the government’s bid to change the way super is taxed. But only for very wealthy Australians.

Government’s proposal

The government has proposed a limit on superannuation tax concessions for balances of more than $3 million. But there’s a problem – it will need the support of the crossbench to pass the legislation as the Opposition says it will oppose the reforms. The Greens are not yet onside.

The proposal seeks to tax earnings on $3 million-plus accounts at 30 per cent rather than the usual 15 per cent. Treasurer Jim Chalmers says that will raise about $2 billion a year with a scheduled start date of July 2025.

Dr Chalmers forecast that the change would apply only to about 80,000 people when it came into effect and would not alter the amounts of money people can put into super.

“It applies to future earnings – it’s not retrospective,” he said.

He has challenged the Coalition to either support “this modest and sensible change” or nominate where else to find billions of dollars to fund budget improvements.

“Labor’s highest priority is targeted cost-of-living relief in a more responsible budget,” he said. “Australians are making hard choices around the kitchen table, and it’s important that the government does the same thing around the cabinet table.”

Fighting the draft legislation

Opposition leader Peter Dutton says the proposal is a broken election promise as then Opposition leader Anthony Albanese had promised no changes to super.

“We’re absolutely dead against it, and we will repeal it,” Mr Dutton has said. “The figure of $3 million is not indexed so in 10 or 15 years’ time there will be tens of thousands, if not hundreds of thousands, of Australians who will be affected by this.”

The Self-Managed Super Fund Association is another who is “bitterly disappointed” with the draft legislation.

Chief executive Peter Burgess said the new regime of taxing unrealised gains, was a “dangerous precedent” for future tax reform.

“While the association doesn’t support super members with excessively large balances receiving generous super tax concessions, taxing unrealised gains is not the answer,” he said.

“It will give rise to many unintended consequences, defies long-standing principles of our tax system, and will result in outcomes inconsistent with the stated objective of this new tax.”

The draft legislation is open for consultation until 18 October.

Super tax costs vs Age Pension

Writing for The Conversation, professorial fellow at the University of Canberra Michelle Grattan says expenditure on age and service pensions is projected to fall from about 2.3 per cent of GDP in 2022-23 to 2 per cent in the early 2060s.

“On the other hand, superannuation tax concessions are projected to rise substantially as a proportion of GDP – from about 1.9 per cent in 2022-23 to 2.4 per cent in 2062-63.

These tax concessions are projected to overtake spending on the Age Pension in the 2040s.”

Perhaps savings from the additional tax on big super balances could fuel an increase to the base rate of the Age Pension.

Do you support the government’s aim to tax super earnings on balances in excess of $3m? Share your thoughts in the comments section below.

Also read: Ask Amanda: How to safeguard your super and later life divorce

Written by Janelle Ward

Energetic and skilled editor and writer with expert knowledge of retirement, retirement income, superannuation and retirement planning.

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  1. No-one, including the government, is limiting how much you can put in super. The issue is how much tax subsidy should be given to the super rich with super balances over $3 million.
    Why should I subsidise your super of over $3 million with a 15% tax? Superannuation is for income in retirement. If you retire at 65 years old, with $3 million in super, and live to 90 years of age, you can have an income of $120,000 per year tax free even if you assume you earn no interest on your superannuation. If you earn 5% interest you can withdraw $150,000 per year and hardly touch the principle. Any argument that super over $3 million should be subsidised by the taxpayer with a 15% tax is nothing short of greed and is absolutely ridiculous. If you scrimped and sacrificed to build your super so you could hoard millions into super – rather than enjoy your life – don’t look to me for sympathy.

  2. 1. taxing unrealised capital gains is lunacy, it doesn’t happen with any other investment.
    2. taxing superfunds with > $3million is logical but it should be indexed. But the real issue is how did these superfunds grow to $100million. Easy – they were allowed to borrow money from outside of super in a time of ridiculous low interest rates. If there is a limit on annual contributions to SUper why isn’t there a total ban on superfunds being able to borrow millions and offset the tax paid by the superfund via the interest paid to the lender of the money. Borrowing by superfunds should be totally banned it only benefits the already mega rich. Can’t see it happening because politicians have got their snouts in the Superfund industry and equally in the investment property industry.

  3. The claim of setting a precedent on unrealised capital gain is a total Furphy, the precedent has already been set, it has been set at 15% of gains, all that would change is the percentage of tax to be applied.
    I will admit that due to my error of working too hard and investing rather than spending, in various forms I have more than the average in super savings. One component, interestingly, while my work colleagues were “investing ” in pooled lotto tickets I saved and invested the same amount into Australian shares and their reinvestment schemes. Those shares alone are now paying me way above the aged pension amount.
    Whatever level is set it should be indexed but I cannot see how anyone needs more than three to five million for a very comfortable retirement and any excessively large amounts are nothing more than tax evasion however dressed up.

  4. I find a hard to conceive how anybody could legally have 50 or 100 million dollars in superannuation. As previously stated by a contributor to this forum, I believe five to ten million maximum in today’s dollars is a reasonable amount. Definitely no more than 10 million dollars should be able to be contributed to any superannuation fund by any one member or his spouse. Government legislation should have been brought in years ago to combat this abuse. It still should be brought in, sooner than later and made retrospective, to stop the greedy well healed loopholers and their overpaid accountants and lawyers from abusing the superannuation system. JACKA.

    • I think super should be tied to the transfer balance cap; $3 million is unnecessarily high.

      My reasoning is super was intended to be a supplement to the aged pension and funding the retirement of our ageing population . Investors with more capital than the transfer cap can invest outside the super system, just as they would have done in the absence of super.

      Super should not be a taxpayer subsidised opportunity for wealthy individuals to accumulate nest eggs for leaving to their estates.

  5. This is an absolute rort. It defies the original intent of the Superannuation system and snubs its nose at ordinary Australians.
    I fully support what the government is wanting to do but suggest that the figure be indexed annually to the age pension increases. Close the loophole and get Super back to what it was intended to be.

  6. Given some of the comments here, I have no doubt the contributors would want to strip me of some of my hard-earned super. I have about 3 times the average in my super gained by sacrificing my wage over the last 30 years PLUS adding any extra money I had in fully taxed non-concessional contributions. And the sacrifice was not without cost – no holidays, no takeaways, no designer anything, etc. NO ONE has the right to take that away from me, yet the politics of envy on display by this Government and posters here is rampant.

    Many of those with more than $3 million in their super probably had small to medium businesses employing others (after all it is the small and medium-sized businesses that are Australia’s major employers) and put the proceeds of its sale into super. $3 million is a relatively small amount after a lifetime of building up a business. Hands off! And to refuse to index it makes the proposal even worse.

    This Government has taken one look at the trillions of dollars held by individuals in super and cannot wait to get their hands on it. Well, hands off mine. It is MY money, not ill-gotten gains (if it were it would not be in super I can assure you) and the Government doesn’t make up the losses when the value drops as a result of THEIR policies.

  7. The politics of envy seems to be in the hearts and minds of this Labor Government.
    This policy is a broken promise and if labor want to pursue it then do so at the next election and let the people have their say.
    Also a tax on unrealised profits is just an awful idea and should be put on hold and let them explain to farmers how it will in effect force them to borrow to pay a tax on a profit they have not made.
    I am afraid Governments see a pot of gold when other peoples savings can be accessed.
    Try cleaning up Government waste first.
    This Govt is out of control and is fixated on the voice at the expense of the masses who are looking for a cost of living break,that they promised and have not delivered.


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