SYDNEY (Reuters) -The Australian government said on Monday it would revise its proposal to hike taxes on the retirement savings of its wealthiest workers, including backing down on plans to tax unrealised gains, seeking to win support for the contentious legislation.
The original plan, announced in 2023, proposed doubling taxes from 15% to 30% on pension balances above A$3 million ($1.96 million), amid concerns tax concessions in the country’s A$4.1 trillion pension system were deepening inequality.
The plan would impact around 0.5% of the population, or about 80,000 people, at present. But it was opposed by investors and industry groups who raised concerns that more people would be affected over time because the A$3 million balance level was not indexed to inflation. It failed to gather enough support to pass parliament before May’s general election.
Treasurer Jim Chalmers said on Monday the centre-left Labor government would make six changes to the legislation and delay its start date by one year to July 1, 2026.
The changes include establishing a 40% tax rate for earnings on balances above A$10 million. Earnings on balances between A$3 million and A$10 million will be taxed at 30%.
The government will also scrap the most contentious aspects of the proposal by no longer applying the tax hike to unrealised gains on pension balances, and introducing indexing for balances above A$3 million.
A low-income offset payment will also be increased from A$500 to A$810 and the threshold will be raised to an income of A$45,000 from 2027, ensuring more savings for 1.3 million Australians who relied on the payments, of whom 60% were women.
Chalmers said the changes would make the legislation more “targeted” and ensure the pension system was “stronger, fairer and more sustainable”.
He said the changes would cost A$4.2 billion over the next four years in lost earnings, mainly due to the start date being delayed a year.
Deputy Opposition Leader Ted O’Brien said it was too early to say if the centre-right Coalition would back the plan as they needed more details.
“Today, though, is ultimately a victory for hard-working Australians and their savings and for that I think we should all be very pleased,” O’Brien told reporters.
AustralianSuper, the country’s largest super fund managing A$365 billion for 3.5 million members, said it welcomed the revised proposal.
($1 = 1.5321 Australian dollars)
(Reporting by Christine Chen in Sydney; Editing by Jamie Freed)
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