19 May 2025
$3m super tax will impact a greater number of Australians than is being acknowledged
CPA Australia’s Superannuation Lead, Richard Webb, says the federal government’s planned extra tax on super balances above $3 million will eventually impact a greater number of Australians than is currently being acknowledged.
“The principal device to manage bracket creep is indexation. However, the government’s proposal to not index the $3 million cap has thrown the arbitrary application of indexation into stark relief,” he said.
“The government cannot underestimate the impact of inflation on superannuation. The cumulative effect of inflation means that a dollar today has the same purchasing power as approximately $0.34 in 1985. This reduction highlights the necessity of preserving the spending power of superannuation savings over one’s working life.
“Bracket creep is already having a silent eroding effect on personal finances. Allowing this further erosion of superannuation savings is contrary to the fundamental principles of our tax system.”
Mr Webb added that it’s wrong for the issue to be portrayed as older Australians protecting their wealth.
“$3 million will not represent anywhere near the spending power it has today. As awareness of this issue grows, there is a growing realisation that this will not be a fair system for future generations,” he said.
“Even an average earner will go on to have more than $3 million in superannuation by the time they retire. It’s simply inconceivable to think that a young Australian today will see a proportion of their retirement savings taxed at a rate of 30 per cent.
“Policy changes of this nature should be consistent with the legislated objective of superannuation. This measure appears to be driven primarily by budget repair, rather than a comprehensive approach to retirement savings policy.
“Today’s policymakers have a duty to ensure that the spending power of future retirement savings is preserved.
“Maintaining the trust and confidence of younger Australians will become harder as the benefits of today’s superannuation system are whittled away for future generations.”
Responding to the recent media discussion on the government's plan to tax unrealised gains on superannuation funds, Mr Webb said:
“Taxing unrealised capital gains is a fundamental breach of Australian tax principles. CPA Australia does not support this.
“Australia’s tax system is built on the principle that tax is paid on income once it is realised – when it is actually received.
“Taxing unrealised capital gains would mean taxing people on the paper profits they haven’t yet accessed, which is not only inequitable but also administratively burdensome. CPA Australia believes this approach is inconsistent with good tax design and could have significant unintended consequences for investment and confidence.
“If this precedent is set, where are the limits? Opening this Pandora’s Box could ultimately lead to the imposition of capital gains tax on other assets and investments, even if today’s policymakers insist otherwise. It is not fair, and not healthy for the economy, if individuals are pushed into selling their investments to avoid paying tax on a hypothetical profit.”
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About CPA Australia
CPA Australia is Australia’s leading professional accounting body and one of the largest in the world. We have more than 175,000 members in over 100 countries and regions. Our core services include education, training, technical support and advocacy. CPA Australia provides thought leadership on local, national and international issues affecting the accounting profession and public interest. We engage with governments, regulators and industries to advocate policies that stimulate sustainable economic growth and have positive business and public outcomes. Find out more at cpaaustralia.com.au
Contact details:
Simon Downes, External Affairs Lead, [email protected] or 0401 461 503