Australian Labor Government Scraps Key Superannuation Tax Plan Elements Amid Criticism

Government Revises Superannuation Tax Plan

The Australian Labor government, led by Treasurer Jim Chalmers, announced on Monday, October 13, 2025, significant amendments to its contentious superannuation tax plan. The most notable change involves scrapping the proposal to tax 'unrealised gains' on superannuation balances, a key element that had drawn widespread criticism from various sectors, including self-managed super fund operators.

The original plan, first outlined in February 2023, aimed to increase the tax on earnings for balances above AUD 3 million. Critics had argued that taxing unrealised gains could force individuals, particularly those with illiquid assets like farms or investment properties within their super funds, to sell assets to cover tax liabilities.

Key Changes and Remaining Elements

Under the revised plan, several crucial adjustments have been made:

• Unrealised Gains Tax Scrapped: The proposal to tax 'unrealised gains' – the change in the value of an asset not yet sold – has been entirely removed.
• Indexed Thresholds: The AUD 3 million and a newly introduced AUD 10 million thresholds will now be indexed to inflation. This addresses concerns about 'bracket creep,' where more Australians would gradually be caught by the tax over time.
• Delayed Implementation: The start date for the changes has been pushed back by one year to July 1, 2026, allowing for further consultation and legislative preparation.

Despite these concessions, core elements of the reform remain. The concessional tax rate on superannuation balances between AUD 3 million and AUD 10 million will still double from 15% to 30%. Additionally, a new, higher tax rate of 40% will apply to earnings for balances exceeding AUD 10 million. The government estimates that these changes will affect less than 0.5% of superannuation account holders, approximately 80,000 accounts.

Boost for Low-Income Earners and Political Reactions

In conjunction with the changes to high-balance superannuation, the government also announced an increase to the Low-Income Superannuation Tax Offset (LISTO). The LISTO will be boosted by $310 to $810, and its eligibility threshold will be raised from $37,000 to $45,000, effective July 1, 2027. This measure is projected to benefit 1.3 million Australians, with potential for an additional $15,000 in retirement savings for low-income earners.

The Greens, however, were critical of the amendments. Senator Nick McKim, the Greens' economic justice spokesperson, stated that Labor 'stripped out the tax on unrealised gains and indexed the $3 million threshold, a gift to the super-rich that will cost the budget billions.' He further described the move as a 'capitulation to the wealthiest people in the country.' Conversely, former Labor Prime Minister Paul Keating, a key architect of Australia's superannuation system, praised the revised plan as a 'huge policy achievement.'

The revised plan is now projected to raise AUD 1.6 billion in its first year (2028-29), a reduction from the initially anticipated AUD 2.7 billion. The Albanese government will require the support of either the Coalition or the Greens to pass the necessary legislation through the Senate.