3 days ago
Cameron doubts he'll ever reach $3m in super. So how do young people feel about Labor's plan?
Cameron Upton has been working since he turned 16, and at 22 has just $4,000.92 in his superannuation account.
The Canberra university student believes there is little chance his account will ever breach the $3m mark above which Labor plans to double the tax rate on earnings to 30%.
'That is so dramatically unobtainable for a large swath of the population that they shouldn't even be worrying about it,' says the 22-year-old, who checks his balance regularly and discusses fund options with his friends.
'It is important that we do think about the risk, but I feel like this is so [high] in the far-flung reaches of great wealth.
'I basically know no one who would be affected.'
The government's plan has been met with fierce criticism from the opposition and some commentators.
The AMP economist Diana Mousina's back-of-the-envelope calculations that a 22-year-old on an average wage would end up retiring with a $3m balance sparked headlines such as 'Why your kids will pay Chalmers' 30pc tax on super'.
By the time millennials are starting to retire in 2055, just one in 10 workers would have accumulated balances over $3m, Grattan Institute modelling has found. Mousina projects that will rise to 30-40%, or about a third of the population, by the 2060s.
In mid-2022, the typical 25- to 29-year-old Australian had a super balance of just $17,000, Australian Taxation Office data shows.
Phy Mei Liu, a 27-year-old from Melbourne, has more than double that – and is keenly aware it's higher than others her age. She says those in the $3m-plus bracket should welcome the chance to pay up.
'I would actually be very glad to pay that tax, because I know that it's funding the solutions,' she says, pointing to government spending on health, education and climate change as top priorities.
'It's a privilege to pay tax in a country like Australia.'
Liu, who says she was paid none of her super entitlements during three years' working part-time in hospitality, knows her super growth would slow if she took time off work to have a child. Families can be $30,000 poorer in retirement than they would be if superannuation was paid on parental leave, advocates have estimated, though new entitlements paid from July may narrow that gap.
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A researcher in gender equality, Liu has seen the heightened risks of homelessness and health issues older women face due to systemic issues in retirement savings. Anyone with a seven-figure super balance is in a different boat, she says.
'Super was never meant to be a tax haven, but it [has] been used as such by wealthier people,' she says.
Grattan Institute analysis has concluded that 'tax-free retirement earnings turn super into a taxpayer-funded inheritance scheme', in part due to tax breaks where high earners bypass the 45% income tax rate by contributing from their wages to superannuation, where they pay a 15% rate.
Labor says its proposal to raise that 15% rate to 30% above the $3m threshold would affect 80,000 people, representing the top 0.5% of super balances. But in avoiding the 45% rate higher earners otherwise pay, they would still benefit from favourable tax conditions.
Essential polling in 2023 found 18- to 34-year-olds supported the tax changes nearly as much as older Australians did, despite more of them believing they had a chance of accruing a $3m balance. One-third (34%) of the younger bracket thought they might end up paying the tax, more than double the share of 35- to 55-year-olds who said the same.
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Luke, a 22-year-old software engineer who has already accumulated about $20,000 in super, may reach the $3m threshold but isn't worried about paying more.
'If it does affect us, we're going to be in a really good position anyway,' says the Sydney local, who asked for his surname not be shared.
'I want to live in a country where the people who are well-off can support the people who need more help.'
Even if young Australians are willing to contribute, many may not end up paying the tax.
Critics of Labor's plan say younger generations will shoulder the biggest tax burden as wages and super balances inflate. Brendan Coates, an economic policy director at Grattan Institute, says that claim is 'nonsense'.
About one in three workers will have super balances above $3m by 2065, according to Mousina's modelling, which assumes above-average earnings and working years but less-than-typical wages growth, fund returns and contributions.
Kayshini Logeswaran, a 27-year-old financial analyst, wants the super system to be more equitable, as long as tax changes focus on those who can afford it.
'[This] doesn't really impact those who are in more of the low- to middle-income threshold, which I think is good, however, over the long run [it could] be a burden,' she says.
'The cost of living is putting pressure on a lot of families … so maybe there can be strategies in place to actually alleviate that tax pressure.'
But Coates is more interested in those affected in the next decade – the vast majority of whom will be older and wealthier, he says.
'This is one way we can ensure that older Australians are paying their fair share,' he says.
'Younger Australians [otherwise] are going to be on the hook for budget repair and the cost of an ageing population on their own.'
The number of workers who would have to pay the tax would also be limited if the fixed $3m threshold was indexed upwards. The treasurer, Jim Chalmers, has said he expects a future government would lift the new tax's threshold; Coates believes an increase would likely be necessary by 2040 to avoid contradicting an existing cap on the tax-free transfer of super balances.
The tax is due to come into effect on 1 July and is budgeted to raise $2.3bn in 2027-28, out of the $700bn or so the federal government collects annually in revenue.
Liu sees it as a 'first step' towards a more even playing field for young workers.
'We're finally rebalancing the scales a little bit and closing that intergenerational gap across wealth,' she says.
