Revealed - the generation of Aussies most likely to get stung by Albo's radical new tax on super
- AMP issues new warning on super tax
Anthony Albanese's plan to double taxes on super balances above $3million will likely hit the average 22-year-old worker before they retire, new modelling shows.
Labor argues its plan to double earnings taxes to 30 per cent will only affect 0.5 per cent of the population or 80,000 people - at the moment.
That 30 per cent tax isn't indexed for inflation - and if it stayed in place indefinitely it would sting Generation Z when they come to retire.
Likewise, the government is also proposing a radical, new 15 per cent tax on unrealised gains.
That would see assets like a farm taxed on their notional value even before they are sold - something which could see Australians reduce the size of their self-managed super funds.
The $3million threshold for that tax proposal isn't indexed for inflation either, which means a lot more workers would be affected in coming decades than the government says.
Modelling author AMP deputy chief economist Diana Mousina told Daily Mail Australia that if the thresholds aren't indexed, the super tax will 'impact a much higher share of people in 40-plus years time' than Labor's 0.5 per cent of people.
'Even someone who is on average earnings throughout their whole life will easily be able to reach this threshold - we're not accounting for any further contributions to super.'
Anthony Albanese 's plan to double taxes on super balances above $3million is likely to hit the average 22-year-old worker before they retire, new analysis shows
AMP's deputy chief economist Diana Mousina has done modelling that reveals Labor's tax plan for superannuation would hit today's average 22-year-old worker before they retired
Her analysis was based on a 22-year-old worker now earning the average, full-time salary of $102,742 who retired and lived off their super before qualifying for the age pension at 67.
'I'm also accounting for people taking time out of the workforce, if they were to have children or not contribute to their super or whatever it is, a career break,' Ms Mousina said.
This individual's super balance would only be increasing by a modest, average pace of six per cent during the coming four decades, as their wage rose by an annual pace of three per cent.
The modelling was also based on compulsory employer contributions remaining constant at 12 per cent during the coming decades, with that threshold increasing from 11.5 per cent on July 1.
Labor's plan to impose new superannuation taxes above the $3million threshold, without indexing it for inflation, will introduce a new form of bracket creep on retirement savings.
'It's another form of taxation basically that's going to impact a much higher share of people,' she said.
Unrealised gains tax could drive up house prices
The government also wants to tax unrealised gains above a $3million threshold.
The Division 296 plan would see assets in a self-managed super fund, like real estate or farms, taxed before they were sold.
The $3million threshold for both tax proposals isn't indexed for inflation , which means a lot more workers would be affected in coming decades (pictured is a Sydney waitress)
This would fly in the face of the usual capital gains tax practice of only taxing something after it has been sold, and would make Australia the only country in the world taxing unrealised gains on super.
The likes of Sweden, Norway and Finland have unrealised gains taxes but on overall wealth targeting the ultra-rich.
Ms Mousina said taxing unrealised gains would see more people put money into property instead of a self-managed super fund, pushing up house prices.
Someone's principal place of residence, or the family home, doesn't incur the capital gains tax.
'When you have distortion in the tax system, people find a way to evade it and if that was to be the case, that people just put more money into real assets i.e. housing, that would actually inflate home prices even more,' she said.
Former Labor cabinet minister Graham Richardson slammed the idea of taxing unrealised gains.
'Taxing people for money they don't have is a pretty dangerous business,' he told Sky News host Rowan Dean.
AMP's deputy chief economist Diana Mousina has done modelling revealing Labor's tax plan for superannuation would hit today's average 22-year-old worker before they retired at age 65
Mr Richardson, a former Labor powerbroker from the Right faction, was confident Treasurer Jim Chalmers would be getting the message.
'I think he's getting the message,' he said.
Greens plan
Labor's superannuation tax planned stalled in the Senate late last year, with the Greens wanting the threshold reduced from $3million to $2million.
But the Greens at least, with their $2million threshold, would include indexation, which would mean a $6million threshold in four decades' time.
'Under the Greens' policy, a 22-year-old is actually better off compared to under the Labor policy,' Ms Mousina said.
'Even though a $2million cap is lower right now, it would impact more people today; it would impact less people in the future.'
Labor has no plans to index its $3million threshold but if it was indexed for inflation, the level would be $10million in four decades' time.
'The government could say, "In X years' time, we're going to index it",' she said.
'I don't think it has to be right now - saying 10 to 15 years' time we're going to index this, it would be a much better policy.'
Independent senator David Pocock had expressed concerns about taxing unrealised gains.
But Labor's landslide re-election in the House of Representatives will now see it also gain new senators, meaning it can get legislation passed with just the support of the Greens.
Mr Albanese ruled out super changes ahead of the 2022 election, only to introduce the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023.
