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The government, despite having the numbers to sail legislation through the lower house, faced opposition from the Coalition regarding a recent legislative change. To secure the bill’s passage in the Senate, the government needed backing from the Greens.
This morning, the Greens announced their support for the legislation. However, they also called on the government to initiate significant tax reform in the forthcoming federal budget.
“Although we’re disappointed that Labor has diluted its initial proposal, we are staunchly in favor of increasing the low-income super tax offset, which will predominantly benefit women’s retirement savings,” stated Greens Senator Nick McKim.
“We intend to support the bill as an initial step toward meaningful, progressive tax reform in this budget,” McKim added.
With the legislation poised to pass the Senate, the changes to superannuation are slated to take effect at the onset of the next financial year.
With the laws set to pass the Senate, the superannuation changes will come into effect at the start of the next financial year.
From July 1, the LISTO threshold will be raised to offset the tax paid on superannuation for anyone earning less than $45,000 a year, up from $37,000, effectively ensuring super is still tax-effective for Australians on low incomes.
Raising the threshold to the top of the second income tax bracket will cover an additional 1.3 million workers.
According to the Association of Superannuation Funds of Australia (ASFA), that change will deliver someone on $44,000 a year close to an extra $50,000 in their super balance by the time they retire.
The other change impacts ultra-wealthy Australians by increasing the tax rate on superannuation earnings for accounts worth more than $3 million.
This will impact the top 0.3 per cent of super account holders – a total of about 90,000 people.
Instead of the current flat concessional tax rate of 15 per cent, from July 1, the tax rate on earnings for super accounts with a balance of between $3 million and $10 million will rise to 30 per cent, and to 40 per cent for accounts worth more than $10 million.
The increased tax rates won’t apply to an account’s entire earnings – only to the proportion of the balance over each of the new thresholds.
Greens push for wider tax changes in budget
By describing their backing as a down payment on progressive reform, the Greens have only raised speculation further that the May 12 federal government will contain some of the most substantial changes to the tax system in decades.
“This budget is a once-in-a-generation opportunity for ambitious tax reform, and we are opening the door for Labor to walk through,” McKim said.
“The current tax system has turbo-charged the housing crisis, wealth inequality and a deepening intergenerational divide,” he said.
“We are demanding bold reform that responds to these challenges and makes our society fairer for young people and working people.
“There is a massive Labor majority in the House of Representatives, the opposition is a rabble, and the numbers are there in the Senate as long as Labor shows courage.
“The only limit is Labor’s level of ambition.”
Treasurer Jim Chalmers has frequently spoken of the government’s desire to address intergenerational inequality.
Last night, The Australian reported Treasury has conducted modelling on limiting negative gearing to two investment properties, while there have also been rumours of tax incentives for electric vehicles and home batteries being scaled back to cut down on federal spending levels.
Last Friday, Chalmers hosted a roundtable discussion with a group of leading private economists, which he said would help inform the decisions made in the budget.
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