Labor backs down on key elements of controversial superannuation tax plan

The Albanese government has spectacularly backed down on its controversial superannuation tax plan, caving to sustained criticism from sections of the media, industry and politics.

The treasurer, Jim Chalmers, announced the surprise decision on Monday morning just three days after Anthony Albanese insisted Labor’s plan remained unchanged.

The government’s plan to double the tax rate on superannuation balances above $3m from 15% to 30% has faced sustained attacked since it was announced in 2023 despite only affecting 0.5% of savers.

The main criticisms were that the policy taxed so-called “unrealised gains” in addition to cash profit, and that the $3m threshold is not indexed, meaning more people will be affected as super balances increase over time.

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Under a major rewrite of the policy, the government now intends to index the threshold up to $10m, scrap its application to unrealised gains and delay the start date until July 2026.

The proposed 30% tax rate will remain for superannuation balances between $3m and $10m, after which a new 40% rate will kick in.

The changes, which cabinet approved on Monday morning, represent a major backdown from the Albanese government after it failed to get the legislation through the Senate in the last term of parliament.

Under a separate change, the government will increase the low-income superannuation tax offset to by $310 to $810 and raise the eligibility threshold from $37,000 to $45,000 from 1 July 2027.

More details soon …