TAX AND SUPERANNUATION – CASSANDRA GOLDIE

In 2025, Labor set about is about to change tax rates on superannuation savings. Labor’s proposal plans to double the earnings tax on superannuation balances above $3 million – from 15 per cent to 30 per cent. The plan, first announced in late 2023, affects only an estimated 80,000 people, and still leaves in place highly favourable tax treatment for retirement savings. For all that, there is criticism that the proposed tax will not be indexed which suggests that in time many more superannuants will be affected. The policy is not yet legislated and there is growing debate as to how the final policy will be affected by votes in the Senate. To discuss the pros and cons of the policy proposal, Ross Greenwood – Business editor at Australian News Channel (Sky News) Australia – and Cassandra Goldie – CEO of the Australian Council of Social Service – addressed The Sydney Institute on Wednesday 16 July 2025.

TAX AND SUPERANNUATION

CASSANDRA GOLDIE

Good evening, everybody. It’s really fantastic to have this opportunity to be at The Sydney Institute to talk with you about the debate over the proposal to introduce some increased taxation over superannuation. And I do in this context, first of all, acknowledge the Gadigal people of the Eora nation, and pay my respects to elders past and present.

The Australian Council of Social Service (ACOSS) is a member-based organisation. Our members are community organisations, people representing pensioners, people representing people who are unemployed, and from large charities who are working on the ground every day, looking to support people. The community sector.

We’ve had a very keen interest for very long time in decent, good tax reform. In our view, we’re very clear that this current proposal before us as a country is very modest, it’s very fair, it’s long overdue and we strongly support this piece of legislation going through the Parliament.

This is a fantastic opportunity for me to lay out for you why we have taken that position. I do think it’s really important for us to be reminded of where we are as a country and to understand what the challenges are that we face before us and why. Therefore, in my view, and the view of ACOSS and our members, this is an important reform to be supported.

The reality is, Australia is, overall, a very wealthy country. In fact, on the latest UBS Global Wealth Report, we are the second most wealthy country by median wealth, after Luxembourg. What we’ve seen, however, is an increasing number of people who are living in poverty. We do this analysis on an ongoing basis. We’ve now got about one in eight people who are living in poverty, and that includes one in six children.

In the context of this important debate about retirement income policy in Australia, it’s very important to know that right now, as National Seniors has recently reported, about 22 per cent of people who are on the pension are living in poverty. It’s a very serious number of people who get to retirement age. And, at the moment, we’ve got about one in five people who are relying on the age pension and are renting.

Whether or not you have paid off your own home makes a huge difference in terms of the adequacy of the pension. A difference about whether or not you can meet basic needs when there is rent to pay. We are in a ticking time bomb there, because we know that we’re only going to see more and more people on the age pension who have not paid off their home. Either they still have a big mortgage or they’re in private rental. In our view, it is one of the biggest challenges – how do we protect people from living in poverty, let alone having a decent, adequate retirement income in a very wealthy country.

Superannuation is a scheme that’s been around for some 35 years. On our analysis, we’re now spending significantly through very generous tax breaks that have been built into the superannuation system. Overall, the value of those tax breaks is currently about $50 billion per year. In a few years it will be about the same value as what we’re spending on the pension.

The way that those tax breaks have been designed, almost 50 per cent benefit the top 10 per cent of people who have got money in the $4 trillion now in our superannuation system. So, coming to the very specifics of this policy, it’s important to remember why we created the super system and why these tax breaks were built into the superannuation scheme. It’s very important to be reminded of what was the purpose of super.

The purpose of super was to help people who would otherwise be particularly at risk of needing to rely either wholly or in part on the age pension to be able to accumulate enough behind them to be able to live with a level of decency in their post-paid working age life. On any measure, you need nowhere near $3 million in your super fund in order for you to be able to achieve that level of adequate pension when you get to retirement life.

What this proposal does is introduce a very modest increase in taxation associated with your earnings in your fund, but only on the growth in the earnings above the $3 million amount that’s in there. If passed, it will help us to generate some additional revenue to invest in some of the critical areas of public life where we need further investment. Including in helping people who are much more at risk of facing poverty, both now and in later life, which is a core mission of ours, and one that I hope that we share in this room.

The new superannuation tax proposal imposes a 15 per cent tax on the investment income of the portion of a superannuation account that exceeds $3 million in value.

Each year, individuals (or their super fund) will have 84 days to pay the tax by deducting it from their super or directly from other savings. The tax applies to both Self Managed Super Funds or SMSFs (which hold most of these high value accounts) and public offer funds (such as industry super funds). It is estimated to raise $2.3 billion a year once fully implemented (and $900 million over the next five years from 2022-23). Approximately 80,000 individuals are affected or 0.5 per cent of all people with super accounts.

Because of the way the tax breaks have been designed on superannuation, it has become seen as a very tax effective way to put away a large amount of wealth if you are fortunate enough to have that. What this proposal will do, in our view, is help to trigger a rethink on whether or not it’s most tax effective to put your money into superannuation. Or whether or not it’s not an appropriate vehicle for you to be putting your wealth beyond what is actually needed in order for you to be guaranteed of a decent pension, to be able to draw down on your super fund in later life.

The bigger concern from an equity perspective is the fact that wealthy people can use superannuation to avoid paying Capital Gains Tax altogether. They do so by placing investment assets into an SMSF and leaving them there until after they retire. When they sell the asset the tax rate on the capital gains that have accrued within the fund (often over many years) is zero. We already tax capital gains before an asset is sold outside super (e.g. land tax on property investments, taxation of Financial Arrangements).

Taxing capital gains as they accrue each year (rather than waiting until the asset is sold) is a principled approach to taxing income. If gains are only taxed when the asset is sold, investors effectively benefit from an interest free loan from the Tax Office. Waiting until an asset is sold before taxing the capital gain also gives rise to “lock” effects, where investors hold assets for longer than they would otherwise to benefit from deferral of tax.

One of the issues that’s been raised is the question of whether it is fair to levy a tax on unrealised capital gains. I remind everybody that we already do that in number of other parts of the tax system. Land tax is just a perfect example. Our land tax is well known amongst economists to be in a very efficient tax base. In many of the tax discussions we’ve been involved in, there’s a view that it is important for us to continue to strengthen the tax base associated with land. That’s an example. Council rates are another one.

People with over $3 million in super are also likely to have substantial assets outside super and are unlikely to lack the liquid assets to pay the tax annually. They can pay the tax from their fund, or directly. If the value of an investment asset (such as shares) falls, this capital loss can be carried forward to offset future capital gains.

If we step back, it’s understandable that sometimes people scratch their heads when they say, why is it that we’re such a wealthy country and we have the number of kids who are currently going without enough? Why is it that we’ve got far too many people who are not guaranteed one meal a day?

We have got to understand that is a consequence, despite being overall a very wealthy country, of being the ninth lowest amongst OECD countries when it comes to the tax revenue that we collect as a community. The ninth lowest. And we are the sixth lowest when it comes to our public expenditures.

I’ll give one example of where we have continued to fail to invest properly, which for ACOSS is very important in our social security safety net. In the 1990s the unemployment payment was 90 per cent of the pension rate. It is now less than 70 per cent of the pension rate. It has declined appallingly and is now a deep poverty payment at just $56 per day, if you happen to face the consequences of being unemployed.

And so we want to see that fixed, and we need to be able to have the revenue available to us to invest in decent child care, aged care, health care, and those other parts of public life that mean that we can all equitably live with decency and be able to meet our basic needs and ideally also have a really enjoyable life filled with love and relationships, and that’s what I’m really here to talk about tonight. Thanks very much.