The two biggest funds in Australia’s A$4.1 trillion (US$2.6 trillion) superannuation industry have reportedly called on the Government to index to inflation a proposed new tax on accounts with more than $3 million.
AustralianSuper and the Australian Retirement Trust, which manage and invest a combined $665 billion, privately lobbied Treasurer Jim Chalmers to tie the tax hikes to inflation to avoid instability and harming confidence, according to the Australian Financial Review newspaper.
AustralianSuper is broadly supportive of the policy but has repeatedly asked the Labor Government to index it, while Australian Retirement Trust (ART) also met Chalmers before the 3 May election and raised similar concerns, the AFR reported.
Azzet contacted the Treasurer’s office for comment and had received no response at the time of writing while the two funds did not comment specifically on their private lobbying.
AustralianSuper, which manages $365 billion for 3.5 million member, has said in the past that indexation of the threshold at which the measure applied would lead to greater certainty and promote stability and confidence in the system.
“While we remain of the view that the $3 million threshold should be indexed, in the absence of indexation of the $3 million threshold, this review should also be required to consider whether the threshold remains appropriate,” the fund said in a submission on the tax in October 2023.
ART, which manages $330 billion for 2.4 million members, said in a statement: “Australian Retirement Trust is supportive of the federal government’s tax changes to super accounts with a balance above $3 million, and believes, like many other taxes, there should be some form of regular review mechanism or indexation in place to ensure the policy remains aligned into the future.”
The ruling Labor party plans to resubmit the controversial law when Parliament resumes following a comprehensive election win and has a greater chance of approval in the Senate with support from the Greens.
The Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023 Bill, which from 1 July would have lifted the tax on super balances above $3 million to 30% from 15%, lapsed because Labor did not have Upper House support for it.
The Bill was criticised by people with high balances because it would tax unrealised capital gains, which is rare in developed countries, violate tax principles and could force the sale of farms and businesses held in super.
Although the Government said the change would initially affect only 80,000 people it has since conceded this could grow to 1.2 million over the next 30 years due to the absence of indexation.
This measure was forecast to raise $2.3 billion in 2027/28, the first full year of revenue collection.
The tax rate on super in the accumulation phase while people are working is 15%, below marginal tax rates ranging from 19% to 45%, and zero in the pension phase once they have retired.
