Treasurer Jim Chalmers is remaining firm on proposed superannuation changes, as Labor goes back to the drawing board to negotiate with the Greens.
Under the proposal, the concessional tax rate would double to 30 per cent on the portion of super balances above $3 million.
The policy aims to curb the number of high net-worth individuals using superannuation for tax deduction purposes rather than for their retirement.
Dr Chalmers said the government didn’t have the numbers in the Senate to pass the legislation and needed to engage with the crossbench.
“Our intention and our preference would be to legislate what we announced,” he told ABC radio on Thursday.
“We’ve done years of consultation now.
“In this case, with the Greens in the Senate to try and legislate the plan that we announced all of those years ago.”
With the median super balance for 60 to 64 year olds sitting at roughly $200,000 for men and $150,000 for women, the vast majority of Australians are unlikely to feel the impact of Labor’s proposal.
It is estimated to affect 0.5 per cent of Australian savers, or roughly 80,000 people according to the Australia Institute.
The wealthiest 10 per cent are receiving 40 per cent of superannuation tax breaks, the treasurer says.
The 42 self-managed super funds with more than $100 million in assets receive more than $140 million every year in tax breaks, according to reports.
But the coalition has vowed to fight back against the policy, as they are opposed to any tax on unrealised gains.
Shadow treasurer Ted O’Brien said he didn’t believe it was a “fair call” and said younger Australians would be caught in the net over time.
“Our belief as a coalition … is that Australia should have lower tax, simpler tax, and fairer tax, and what Labor is putting on the table with its superannuation tax breaches all of those things,” he told ABC’s News Breakfast.
“Every aspect of this is looking awful, and it certainly does not align with our values as a Liberal Party, or indeed, a Liberal National coalition.”
Critics say the policy’s introduction of a tax on unrealised capital gains goes against the fundamentals of the tax system and would have unintended consequences, such as driving investment off-shore and threatening Australia’s financial stability.
Unrealised gains are ‘paper profits’ – increases in the value of assets such as properties or shares that haven’t been cashed in.
On Wednesday, Dr Chalmers said calculation of unrealised gains was not unique in the tax system, and that any losses can be carried forward against any gains.
Tax on unrealised gains is already part of the Australian tax system and is, for example, paid under land tax regimes.
The Greens support the legislation in principle but want the threshold lowered to $2 million and indexed in line with inflation.
Greens senator Sarah Hanson-Young said the ball was in the government’s court.
“We want a reform to the system that makes it stronger and fairer,” she told Sky News on Thursday.
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