Australia’s government plans to double the tax rate on large pension balances to 30% from 2025-26, saying the change will impact less than 0.5% of account holders and make the system more sustainable.
(Bloomberg) — Australia’s government plans to double the tax rate on large pension balances to 30% from 2025-26, saying the change will impact less than 0.5% of account holders and make the system more sustainable.
The surprise decision to target those with superannuation balances above A$3 million ($2 million) comes as the government confronts rising debt amid growing spending pressures on defense, health, age care and disability support, Treasurer Jim Chalmers said Tuesday.
“These challenges mean we need to make responsible budget choices to ensure generous superannuation tax breaks are better targeted and sustainable,” he said shortly after releasing a full accounting of tax expenditures which showed the concessions on pension accounts cost more than A$50 billion every year.
The change to the concessional rate will affect around 80,000 people and should rake in about A$2 billion of revenue in its first full year, Chalmers said. Further consultation will be undertaken with the industry and other relevant stakeholders.
The announcement comes as the center-left Labor government faces growing pressure to wind back spending to avoid fueling inflation. The Reserve Bank has flagged more interest-rate increases are under consideration as consumer-price growth remains stubbornly high.
Australian Treasurer Says Government Spending Restraint Necessary to Beat Inflation
The Treasurer, at a news conference with Prime Minister Anthony Albanese, highlighted that the tax change will only apply after the next election, meaning it will be put to the electorate first.
Albanese pointed out that 17 people have balances of more than A$100 million and one person has more than A$400 million.
Chalmers had been flagging potential changes to superannuation tax breaks ahead of the May 9 budget. He said the country’s top 10 tax concessions and deductions were costing the budget more than A$150 billion every year in lost revenue, a third of which goes to the so-called superannuation industry.
(Updates with expected revenue in 4th paragraph)
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