One group likely to see tax hike first

Treasurer Jim Chalmers, who in recent days has floated a tax cap on super funds over $3m, released the figures as part of the update to Treasury’s tax expenditures and insights statement on Tuesday.

It forecasts the cost of the tax break to be about $50bn. The statement also estimated that of the 10 biggest tax expenditures, worth more than $150bn annually, around a third is made up of tax discounts.

“The majority of these super tax breaks go to high income earners,” Dr Chalmers said in a statement.

“For instance, over 55 per cent of the benefit of superannuation tax breaks on earnings flow to the top 20 per cent of income earners, with 39 per cent going to the top 10 per cent of income earners.”

Currently, a person earning under $250,000 can make a contribution to their super before tax at a rate of 15 per cent.

For individuals whose combined income and concessional contributions exceed $250,000, the effective rate on contributions above the threshold is 30 per cent.

A 15 per cent tax on the earnings within super funds is also applied which is much lower than the 45 per cent marginal rate taxed on high-income earners.

The government has come under fire for the plan due to Prime Minister Anthony Albanese’s election pledge that Labor had “no intention of making any super changes”.

Asked if he had considered it a broken election promise, frontbencher Tony Burke responded with a firm “no”.

“I had no idea that there was this concept where people would have the sorts of extraordinary amounts of money in superannuation accounts, which was therefore protected from normal taxation, where it was clearly going way beyond what would be for the purposes of retirement,” he told the ABC.

“So it’s a valid conversation for us to be having and working through the detail of – a trillion dollars of debt doesn’t pay itself down.”