An in-depth look at the changes potentially on the way to Aussie superfunds.
You’ve no doubt heard the discussion and debate recently about changes Labor has been looking to make superannuation. While first announced in 2023 and campaign on during the 2025 Federal Election Campaign, these changes may have caught some off guard, with plenty of arguments on both sides.
So, what is Labor planning to do? When does it come into effect? And how may it affect you? Let us walk you through the plan Labor has put together to help you prepare for your own retirement going forward.
What Changes Does Labor Want Make to Superannuation?
Currently, all superannuation contributions are taxed at 15% regardless of the balance. However, Labor has proposed to make changes specifically for superannuation balances exceeding $3 million.
Under the new proposed by the Federal Labor Government, if your super balance is more than $3 million, all earnings will be taxed at an additional 15%, making for a total tax of 30% above the $3 million threshold. This would affect about 0.5% of Australians.
These changes would take effect from July 1 2025, though these reforms have yet to pass Parliament.
Why Does Labor Want to Make These Changes?
Australian Taxation Office. Photography by Poetra.RH via Shutterstock
According to Albanese government, this reform would reinforce the original purpose of superannuation to provide financial security in retirement, rather than a vehicle for accumulating excessive wealth. By discouraging the use of superannuation for wealth accumulation, the changes may help address the growing wealth gap in Australia to create a more sustainable and fair retirement system.
The changes could also generate approximately $2 billion annually for the Federal Government. The additional revenue generated from this reform could be used to fund essential public services, such as healthcare, education, and infrastructure across the country.
Some economists and financial experts have endorsed the proposal as the first in a broader sweeper of changes needed to reform Australia’s tax system.
The Coalition Has Denounced the Proposed Changes
As expected, these changes have faced harsh critique from the Coalition, high-net-worth individuals, and financial experts. These groups claim the changes could undermine trust in the superannuation system and create retrospective tax consequences. In fact, Federal opposition leader Sussan Ley has described the proposal as a “class warfare tactic.”
One of the main concerns is the potential impact on trust in the superannuation system. If individuals perceive the changes as unfair or retrospective, they may lose confidence in the stability and reliability of the system. This could lead to reduced participation in superannuation and a shift towards other investment options.
Additionally, the retrospective nature of the tax changes could create financial challenges for those who have already made plans based on the existing tax rules. These individuals may face unexpected tax liabilities, which could disrupt their retirement plans and financial security.
When Do These Changes Come into Effect?
It is important to note that while these changes could go into effect July 1, 2025, these proposals have not pass Parliament, and their passage is uncertain. It requires support from either the Greens or the Coalition to become law, with both hesitant to support its passage. Negotiations are ongoing, and while Labor is firm on the proposed changes, the outcome will depend on the political dynamics and potential compromises.
For an overview of Labor’s other post-election plans, learn more in our breakdown. And discover how to Plan Your Superannuation as You Approach Retirement.
