Government ‘intends to proceed’ with taxing unrealised gains: Chalmers

In a press conference at midday, Chalmers said although it is correct the prime minister had said the government was open to negotiating with the Coalition on super tax reform, the plan to tax unrealised capital gains is the “way recommended by Treasury and it’s the way that we intend to proceed”.

“The unrealised capital gains calculation was recommended to us by Treasury. We provided years of opportunities for people to suggest different ways to calculate that liability, and nobody has been able to come up with one, and so that’s an important bit of perspective,” he said.

“Now when it comes to the issue more broadly, this is a change which is modest. It is methodical, as I said, it’s been on the books for years now, and it makes a meaningful difference to the budget, and it helps us fund some of our other priorities.

“It’s all about making sure that the superannuation system is fairer, that it’s more sustainable. It only impacts about half a per cent of people with superannuation accounts. We put this proposal out there some years ago and there have been multiple occasions for people to propose alternative ways of calculating the liability.”

The Treasurer continued that he does not believe the concern over the proposal is “broadly and deeply felt in the Australian community”.

“We’re talking about half a per cent of people with superannuation being impacted, people with more than $3 million balances,” he said.

“We’re not eliminating tax concessions for people with big balances, we’re still providing very substantial tax breaks, just slightly less substantial. If someone’s got $3 million in super by one set of assumptions, their superannuation tax concession before this change is a bit over $14,000. After this change a bit over $13,000, so still very generous tax concessions for people with big balances in super.”

He added that those complaining about the super tax are the “same people” who claim the government needs to abandon superannuation tax concessions and need to deliver bigger surpluses.

“My job, and the government’s job, is to make it all add up. Sometimes that involves decisions which not everybody likes. And obviously I understand that not everybody likes this change, but we have to do what’s right in response.”

He added that it’s important to remember the proposed calculation of unrealised capital gains exists elsewhere in the tax system.

“It’s not new that this is the way that we are proposing to calculate it. People will say it’s about the calculation. Some people will say it’s about the indexation, but I think in a lot of instances, again, respectfully to people making these comments, and I welcome people making a contribution to the national economic debate, but I think a lot of it is not really about the method of calculation,” he said.

When questioned about the claims that the prime minister will be excluded from paying the Division 296 tax, Chalmers said it was “shameful” that people were suggesting this.

“We made it clear that [the prime minister and other politicians] are included in the legislation we released in November 2023 and in the regulations we released in March of 2024. It’s been abundantly clear in black and white that the prime minister is included, and people should stop lying about it,” he said.

“We’ve been clear about how defined benefits would be treated since we announced the policy. Just as the previous government did with their changes to super, we apply commensurate treatment to defined benefit interests to ensure that there are equivalent tax outcomes, and the same rules apply to everyone on defined benefit schemes without the constitutional exemption, including federal politicians.”

When it comes to the deferred liability, he said, they are consistent with the long-standing approach taken in other areas of super like the extra contributions tax for high-income earners.

“Tax liabilities are deferred until the pension phase because members in those schemes can’t access their super to pay tax debts until that point. It’s a function of necessity, but we charge an interest rate on those liabilities to make sure that people don’t receive an inappropriate advantage from the necessity of calculating and paying those liabilities on retirement,” he said.

“The calculation reflects the same sorts of ways it’s been calculated in the past and because the liability is paid on retirement, there’s an interest rate applied to it to make sure that there’s no inappropriate benefit.”