Jim Chalmers, the Australian Treasurer, has been accused of being a liar or conman by the defenders of his planned reforms to Australian superannuation taxes. He accused his challengers of waging a “bad-faith campaign.” He has called his proposed reform—an increase in tax rates on high super balances—modest but meaningful. The legislation as proposed would increase the all earnings tax on superannuation balances greater than $3 million from 15% to 30%. Chalmers intends to pass the tax changes into law unamended and without delay, in the face of heavy political opposition from the opposition parties.
The super tax plan particularly targets individuals with access to the older defined benefit pension scheme, a group which includes Prime Minister Anthony Albanese. Even within Coalition ranks, frontbenchers have savaged the initiative. They claim it’s “tax break for his boss,” suggesting it’s in Albanese’s best interest. Chalmers reiterates that the Coalition’s attack is disingenuous, claiming that they are not “fair dinkum” on wanting to negotiate an agreement.
Coalition’s Contradictory Stance
Incredible scenes though, the opposition party has taken an incredibly negative approach to a super tax proposal. Influential backers like James Paterson and Matt Canavan have been releasing contradictory statements about and clarifying its meaning. The idea was condemned as “an absolute disgrace” by then-Liberal Shadow Treasurer Ted O’Brien. He ominously predicted that it would create a “nightmare for the Australian economy.” He expressed a clear eagerness to work in partnership with Labor. He’s looking to them to amend the plan, including taking out the unrealized gains component and indexing the $3 million threshold.
In response to O’Brien, Chalmers sought to defend the fairness of the reform. He pointed out that very generous tax concessions remain in place, stating, “We’re not eliminating tax concessions for people with big balances; we’re still providing very substantial tax breaks, just slightly less substantial.” He thinks the upcoming changes are necessary to make sure that people with multimillion-dollar assets pay their fair share.
Implications for High-Balance Super Funds
One big question is whether or not to index the $3 million threshold. Critics say this decision will make it increasingly less effective going forward. Without indexing, it’s expected that this threshold will fall to $2 million in just 15 years as inflation erodes its value. Chalmers dismissed concerns about the threshold’s future value, insisting that the plan targets “extremely generous tax concessions” and is designed to ensure equity within Australia’s tax system.
Chalmers reiterated that workers with defined benefit pensions will be offered other ways to settle their tax debt. This means politicians elected prior to 2004. He highlighted the extensive consultations conducted prior to announcing these reforms, noting, “These changes were announced almost two-and-a-half years ago now. We did multiple rounds of consultations… We provided years of opportunities for people to suggest different ways to calculate that liability, and nobody has been able to come up with one.”
Public Perception and Tax Reform Challenges
As opposition to the plan ratchets up, Chalmers implored Americans not to fall for media storylines designed to pit folks against one another. He remarked on the disconnect between public opinion and media coverage, stating, “I think we should resist the temptation to think that because overwhelmingly two media outlets don’t like this change, to assume that that concern is kind of broadly and deeply felt in the Australian community.”
Chalmers further recognized the difficult realities of being an advocate for tax reform. He pointed out that a lot of people talk about being willing to support reform in the abstract. At the same time, they balk at concrete proposals. I think, beyond the merits, this is really a problem area when it comes to tax reform. Everyone says they support tax reform in theory. When it comes to specific proposals, they rarely support it.
