The recently proposed changes to the superannuation system stink. Labor's plan to double the tax rate for those with super balances over $3 million may seem like a tax on the wealthy, but it will hit younger Australians hardest.
Since the announcement of the superannuation goalpost moves by the Federal Treasurer last week, One Nation has been campaigning hard on this issue. We have a petition that is garnering support and we have more campaigning planned in the weeks ahead.
This fight is so important because the issue affects young people more than anyone else.
Inflation is running at eight percent, meaning that $3 million will be worth less in the future than it is today. Many young Australians will need more than $3 million in their superannuation to retire comfortably, and if this threshold is not adjusted for inflation, they will be subject to higher taxes.
A recently published example gives this scenario: take a 30-year-old with a $200,000 super balance who earns an average income of $100,000 per year. By the time they reach 62, assuming average returns on their super, they will have a balance of over $3 million (DailyMail 03/03/2023). This young, average-earning Australian will now have to pay double the tax rate on their super, despite not being considered wealthy.
The impact of this tax change is even more significant when you consider the impact on a retiree who plans to live for another 20 years after retiring at age 65. They will have $50,000 less per year to support themselves in retirement, and over their lifetime, will pay $700,000 more in superannuation taxes.
This breach of trust is a huge blow to younger Australians who are already struggling with the cost of living. It also undermines confidence in the superannuation system, making people uneasy about putting their money into it. If Australians can't trust governments not to raid their super in the future, they may choose not to invest in it at all.
To restore trust in the system, the government should abandon its proposed changes altogether and stop moving superannuation goalposts.
Inflation is the government's best friend when it comes to tax revenue, as it pushes more and more Australians into higher tax brackets without them becoming any richer. Indexing all tax thresholds to inflation would help to prevent bracket creep and ensure that average Australians don't end up paying tax rates meant for the wealthy.
The proposed changes to superannuation do nothing to help people struggling with the cost of living today. Instead, they risk pushing more Australians onto the pension, exacerbating the very budgetary issues that the changes were meant to address. It's time for the government to take action and restore trust in the superannuation system.