A major change to the pension system by the Albanian government could affect 200,000 people under the age of 30 – thousands more than initially claimed
- Labor wants 30 percent tax on people with $3 million in super
- The government claims only 80,000 people would be affected
- The Financial Services Council fears 204,000 under the age of 30
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Prime Minister Anthony Albanese’s government is being warned that more than 200,000 Australians under the age of 30 will be affected by Labor’s pension changes.
A draft law was released this week with a plan to double the concessional contribution to 30 percent for people with more than $3 million in retirement savings.
The government claims this will only affect 80,000 people or 0.5 percent of the population, while everyone else continued to pay a concessional tax rate of 15 percent.
But the Financial Services Council, which represents retail super funds, claims the proposal would hurt 500,000 existing taxpayers, including 204,000 under the age of 30.
Acting CEO Spiro Premetis said the planned $3 million cap – without plans to index it for inflation – would ultimately hurt young people more as their retirement savings grew.
“If we leave the limit at $3 million, this means that a 30-year-old, in today’s dollars, will have a real limit of about $1 million, which calls into question the intergenerational fairness of a non-indexed limit ‘, he said.
Prime Minister Anthony Albanese’s government is being warned that more than 200,000 Australians under the age of 30 will be affected by Labor’s pension changes
Treasurer Jim Chalmers unveiled the plan in February in an effort to save $2.3 billion a year in lost government revenue.
Dr. Chalmers and assistant treasurer Stephen Jones argued this week that it was only a modest proposal.
“This modest adjustment, which will be implemented after the next election, will affect only a handful of people,” they said.
‘The change will not change the amount of money people can put into super, and will apply to future income – it will not be retroactive.
“The amendments are in line with the government’s proposed objective of retirement, to preserve savings to generate income for a dignified retirement, alongside government support, in an equitable and sustainable way.”
The changes would come into effect on July 1, 2025 if Labor is re-elected that year.
Shadow Treasurer Angus Taylor said this would be a broken promise.
“First and foremost, this is a broken promise,” he said.
‘Labour said before the last election that they would not change the rules around pensions. They wouldn’t raise taxes.
‘This is a broken promise. It is a higher tax on pensions.’
During the May 2022 election campaign, Albanese told a Sky News reporter that he would not interfere with pension savings if Labor were elected.
“We have said that we do not intend to make any major changes,” he said.
The Financial Services Council, which represents retail super funds, says the proposal would hurt 500,000 existing taxpayers, including 204,000 under the age of 30 (pictured at Sydney’s Royal Randwick Racecourse).
Consultation on the super proposal ends on October 18, with the Greens saying last month they would vote with the Coalition to block the legislation unless super was added to paid parental leave.
Young people tended to have very little super, with men aged 25 to 29 having a median balance of $17,243, compared to $17,528 for women in the same age group, Australian Taxation Office data for 2020-2021 shows.
Former Liberal treasurer Peter Costello introduced generous tax breaks for super contributions in 2006.
The Australia Institute think tank estimated that the super tax concessions cost the budget $52.6 billion a year, almost as much as the $55.3 billion spent on the age pension.