On Monday last, McTreasurer Jim Chalmers flogged a potential superannuation overhaul, with those holding multi-million-dollar balances under the microscope.

The Federal Government wants an old school superannuation shake-up, saying it’s been too easy for Australians to dip into their super since ScoMo and The Pandemic (budding rock bands can apply for this copyright name at Stockhead).

They’d also like to get their hands via a higher tax on a few multi-million dollar accounts.

According to the Australian Taxation Office (ATO), our most exciting super balances are made up of some 411,128 happy clappers who’re sitting on more than $1 million in their super funds.

The ATO puts about 400,000 Australians with between $1 and $2 million in their super funds while 100 people had more than $50 million.

Don’t feel too outraged, the average Australian – and you know who that is – has a super balance of around $150,000.

Anyway, in a doorstop to – apparently – celebrate the 40th anniversary of the Hawke-Keating government, Chalmers said the following, instantly putting everyone at ease with some coool, soothing words which really hit home. A lot.

 

“This is a modest change, but a really simple choice. This is a modest change that only affects half a per cent of Australians. It is making very concessional tax arrangements… a little bit less so.

There will still be generous tax concessions for everybody in the system… but a little bit less generous for people with more than $3 million in their superannuation accounts – and it doesn’t come in until after the next election.

…So this is a modest change and it is a simple choice. And the choice is this – to do as we are proposing, to make tax concessions a little bit less generous for people with tens of millions of dollars in their super, or…

…to do what the Coalition did when they were last in office, which was to chase and demonise the most vulnerable people with Robodebt, and to try and diminish and undermine and hack away at the foundations of Medicare. These are the simple choices, often difficult, but simple choices that we need to make as a country…” 

 

Ask first, break later

News of the mega overhaul of our $3.3 trillion superannuation sector begins in quality Labor fashion with a touchy-feely consultation paper on legislating a direction for Aussie retirement investment eggs.

Chalmers says he wouldn’t mind capping super tax concessions for people with high retirement balances and maybe have a bit of a crackdown on employers not playing ball super well and ripping off their workers.

Of most importance is that anyone with more than $3 million in their super accounts can expect to be whacked at a higher rate, in a move by the federal Treasurer that has industry players waking up in their cars in a cold sweat.

The plan basically looks thus: from July 1, 2025, the concessional tax rate will increase from 15% to 30% for about 80,000 people with balances above the $3 million mark.
 


The story of a charmless man

Based out of Sydney, Plato Investment Management juggles over $10 billion in assets under management and has a real strong focus on retirement income.

They reckon if we’re capping super then it’d be pretty urgent to say the Labor Government’s $3 million super cap must be indexed.

“This is an enormous flaw in the current proposal. It is perplexing the Treasurer has indicated this cap will not be indexed over time,” said Dr Don Hamon, managing director of Plato Investment Management.

Chiming in with Mr Chalmers is PM Anthony Albo, who’s just not making cents, now he’s a highly paid politician. Hoho.

“This proposal does not change the fundamentals of our superannuation system,” the PM said this week. “99.5 per cent of people with superannuation are unaffected by this reform. Under 80,000 will be impacted by this.”

Yes. We’re not just getting old, we’re incredibly skint too.

 

Somebody please do the math

Dr Don, sharing a state of apoplexy with the 80k or so Aussies that are impacted, sees it entirely the other way.

“Currently the move is expected to impact 80,000 people, or just 0.5% of super accounts with balances of over $3 million in today’s money, however we have inflation currently running at 7.8% which will erode the real value of the $3 million cap over time.”

“This means a lot more than 0.5% of superannuation balances will eventually be taxed at 30%,” he claims without shouting and pretty compellingly.

Dr Hamson wants the Treasurer to get out and do some work, possibly math.

Firstly, doing what the ATO’s done – banging out some forecasts and pinpointing just how many of us will end up getting whacked by this change in the future.

“How many people in the superannuation system today will be impacted by this cap at some time in their superannuation journey?

“You only need to do some basic math – if inflation ran at 4% per annum for the next 30 years, and remember inflation is currently 7.8%, a $3m cap would be equivalent to just $925,000 in today’s dollars.

“Inflation will mean that many, many more individuals will be hit by this cap in the future if it is not indexed to inflation. I think voters need to know how many people will be impacted in say 30 years’ time, not just how many are impacted now.

“The other big question for the majority of retirees and even those nearing retirement is – what other changes is this Government likely to make next?”

 

Footnote

The ATO has been busy.

Their data dump from 2019, was produced with a fine comb. What they did was sift through each super fund bracket sorting the wheat from the chaff so to speak until there was a single, most fascinating unclaimed account.

One with more than half a billion ($544 million) sitting quietly aside, waiting.

Needless to say Twitter is not happy.

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