The Albanese Labor government’s new tax geared to individuals’ total superannuation balances is to be reintroduced to Parliament with the intention that it take effect from 1 July 2025.

This paper argues that there are many reasons to object to the tax. While the paper emphasises that the tax should not proceed in any form, it focuses on critiquing three key design features: the absence of indexation; the taxation of unrealised capital gains; and the treatment of defined benefit schemes.

Key points

• The new tax as designed is anything but modest and will have large effects, initially on a small – but growing – number of people.
• There are likely to be strong behavioural responses, with some taking funds out of super to reduce their balances or giving up on superannuation because of the history of change; the expected revenue yield is unlikely to be realised as people shift funds to other concessionally taxed structures, including more expensive owner-occupied housing.
• The tax should be shelved, or at least subject to review and amendment with its implementation date postponed for at least 12 months.
• If, and when, it proceeds, any impediments to people shifting funds out of superannuation where their total balance exceeds $3 million should be waived for 12 months leading up to implementation.