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Retirement tax changes: Modeling says 1 in 10 affected by $3 million cap


One in 10 Australians who retire in 30 years’ time would be affected by Labour’s proposal to cut tax breaks for the largest super-balances, according to new models unveiled in parliament.

The Treasury Department has predicted that 10 percent of workers will retire by 2052 and have enough pension to be involved in the plan to double the favorable tax rate on super balances of more than $3 million from 15 percent to 30 percent.

The Albanian government announced the policy last week, saying the changes would affect just 80,000 people, or 0.5 per cent of Australians when it is scheduled to take effect after the next federal election in 2025.

But Treasury Secretary Katy Gallagher revealed more Treasury Department models on Monday when she defended the reform during Senate Question Time.

“In 30 years, Treasury expects that roughly only the top 10 percent of earners will retire with a retirement balance of about $3 million or more,” she said.

Australians with very large super-balances would still get tax breaks under the policy, just smaller ones, with Labor claiming the reform is needed to improve the budget by saving $2bn a year.

“This is a modest change that we are making in response to the budget recovery necessitated by economic vandalism in the coalition’s decade of government,” Senator Gallagher said.

Still, the opposition seized on her revelation.

Senator Matt Canavan demanded to know why Labor failed to tell Australians last week that 10 percent of them would ultimately be affected by the policy.

In the House of Representatives, opposition leader Peter Dutton fired a question at Anthony Albanese about the same models about 100 minutes into Question Time.

In response, the Prime Minister said Australian workers are expected to earn more in the future and face different tax conditions.

“I make this bold prediction; that some people will earn more in 30 years than they do now, and that some people will pay different income tax rates in 30 years than they do now,” Albanian said sarcastically.

Treasurer Jim Chalmers told parliament that Treasury modeling was not the “stunning insight” the opposition was making.

“Right now, in 2025, less than half of one percent of people will be affected… At the beginning of the next decade it will be about one percent and… in 30 years, one in 10 people will be affected” , he said in response to a question from opposition spokesman Angus Taylor.

“This is the number that the shadow treasurer thinks is some kind of mind-blowing insight.

“What we’re proposing is a modest change, but it’s a simple choice.”

The coalition has lashed out at the government for breaking an election pledge not to make changes to pensions, but polls suggest Australians support the policy, especially at a time when people are grappling with the cost of living due to runaway inflation .

The latest Newspoll, conducted for the Australian newspaper and published on Monday, found that 64 percent of people agreed with plans to double the favorable tax rate on super-credits of more than $3 million.

Eighty percent of respondents who identified as Labor voters approved the plan, as did 54 percent of those who said they voted for the coalition.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.