The Labor government has announced its intent to increase the maximum superannuation tax rate on any member balance over $3m from 15% to 30% – that’s 30% on the excess over $3m, not the whole member balance.

The announcement is not breaking an election pledge as the measure will not be implemented until after the next federal election. It is planned to take effect from the 2025/2026 year.

The Coalition needs to be careful here as it may find itself on the back foot by completely rejecting any change. The point that Labor will push is that this affects only 0.5% of the population and, by rejecting it, the Coalition are siding with the 17 people with over $100m (one with $400m) in super. I doubt if this measure will lose Labor any votes whilst the Coalition may lose some by rejecting the measure outright.

It was the Coalition’s Malcolm Turnbull who started reeling back some of the very generous super tax concessions by introducing pension and contribution caps. There was no doubt that more changes have always been coming and, by accepting that, we can better influence the outcome. Is $3m the right number? I think that $5m would receive negligible negativity and there is time to work on that. Whatever the number, it must be indexed.

More to come……