SYDNEY: Australia has pushed through a contentious new tax on the country’s wealthiest retirement savers, capping three years of political wrangling and opposition from savers that forced the government to scale back its original plan.
The new law, which passed the Senate on Tuesday, slaps an extra 15% levy on profits from pension balances above A$3mil (US$2.1mil), in a change likely to impact up to 90,000 savers.
That’s on top of the 15% tax that they, and most Australian workers, already typically pay on investment earnings in their superannuation accounts.
The legislation also introduced a 40% levy on earnings from pension accounts with more than A$10mil.
The change will make the pension system “fairer from top to bottom”, Treasurer Jim Chalmers said in a statement.
“We are helping workers earn more, keep more of what they earn and retire with more, while also strengthening Australia’s world‑class superannuation system.”
The protracted effort to pass the law has shone a light on Australia’s fast-growing pension system, and the debate over whether it’s strayed from its core purpose of supporting retirees to favour wealth accumulation strategies.
It’s also highlighted the surge in self-managed pensions, which now account for roughly a quarter of the A$4.5 trillion industry and can be more customisable for investors.
Data from 2024 showed 42 such funds held more than A$100mil in assets each.
Even before the tax takes effect, affluent savers have been scrambling for ways to blunt its impact.
KeyInvest, a financial-services firm focused on retirement products, said advisers have stepped up their search for complementary strategies to shield high-net-worth clients.
The new law had triggered a “genuine reassessment of how wealth is structured for clients with larger super balances, particularly where intergenerational planning, estate complexity and liquidity flexibility are priorities,” KeyInvest managing director and chief executive officer Craig Brooke said in a statement.
He added that the firm had seen a renewed interest in its investment bond products.
Chalmers first introduced the proposal in early 2023, in a move that was largely seen as a modest effort to address calls for tax reform in Australia.
The plan then stalled due to a lack of support in the Senate.
The Labour government revived the law-change after a landslide election victory last year, but scaled back elements of the plan in October following mounting opposition, particularly in relation to taxing unrealised gains and keeping key thresholds fixed as inflation rises.
The government was forced to rely on the Greens to steer the legislation through the upper house.
Greens Senator Nick McKim said the party was disappointed the original proposal had been “watered down” but would “support the bill as a downpayment on genuine, progressive tax reform” ahead of the upcoming federal budget.
The legislation also updates pension tax arrangements for workers on lower wages.
The low-income superannuation tax offset will increase to ensure people don’t pay more tax on contributions than on their take-home pay. — Bloomberg
