Government’s Superannuation Tax Plan Stalls as Crossbench Demands Changes to $3 Million Threshold
Prime Minister’s office engages Treasury on reforms amid concerns over unrealised gains taxation, indexation
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The federal government’s plan to increase taxes on superannuation accounts exceeding $3 million has stalled in Parliament as crossbench MPs push for major revisions, with Prime Minister Anthony Albanese confirming Friday his office has received briefings on potential modifications to the controversial policy.
Independent MP Kate Cheney told ABC’s Afternoon Briefing the Prime Minister’s office has been communicating with the Treasury Department about proposed changes, signaling potential compromise on legislation that has languished for months without the numbers to pass.
“I think it’s probably good news if the Prime Minister and the Treasurer are talking about what changes could be made to it,” Cheney said Friday. “I have no problem with the principle behind the policy to limit tax concessions for really big super funds, but it just needs to be done in a way that’s consistent with the principles of good tax policy.”
The proposed changes, which would limit tax concessions for superannuation accounts above $3 million, have drawn fierce opposition from crossbench MPs over two key design flaws: the taxation of unrealised gains and the failure to index the threshold to inflation.
Albanese, speaking at a housing announcement in Brisbane on Friday, confirmed his office regularly receives policy briefings but declined to detail specific concerns about the superannuation legislation.
“We receive briefings on policy all the time, as you expect the Prime Minister’s office to do,” Albanese said Friday. “That’s what we do. There’s nothing unusual about that. That’s what occurs right across the full suite of policy issues. Our policy is as it stands.”
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Crossbench Outlines Path to Compromise
Cheney, whose vote is critical to passing the legislation, said the government needs to address the taxation of unrealised gains before she could support the bill.
“I think taxing unrealised gains is the biggest issue, just because it’s not consistent with good tax policy,” Cheney said. “The other two would be good to address as well. I’d like to see the threshold indexed just like I’d like to see tax brackets indexed.”
The Perth-based independent said she would welcome different proposals from the government.
“I think it would be a good sign if the government has actually heard the feedback from me and others on this and is looking at how it could be done differently,” she said.
Unrealised gains refer to increases in asset values that have not been converted to cash through a sale. Taxing such gains before assets are sold represents a departure from standard tax policy and has drawn criticism from economists and tax experts.
The $3 million threshold, which is not indexed to inflation, would gradually capture more Australians over time as superannuation balances grow with investment returns and inflation.
Government Delays Parliamentary Vote
The government has repeatedly delayed bringing the legislation to Parliament after determining it lacks the votes to pass. Senate testimony this week revealed Treasury officials told senators that stakeholders have raised concerns about the policy’s design.
When pressed about those concerns at Friday’s press conference, Albanese declined to elaborate.
“The Senate have given statements about policy development in the normal way,” Albanese said. “There’s nothing unusual. Nothing unusual.”
A journalist asked: “Tell us what those concerns are as part of that public discourse.”
“Well, it’s not my job, it’s your job,” Albanese responded. “So I’m not going to do your job for you. Policy debates happen. Normally, transparently, yes, people get briefings. That’s how policy develops.”
Broader Tax Reform Debate
The superannuation impasse has highlighted the political challenges of advancing tax reform, even on relatively narrow changes affecting a small number of wealthy Australians.
Cheney said the difficulty in building consensus around the superannuation proposal signals the need for a comprehensive approach to tax policy.
“I would love the focus to be off this specific small change and onto the broader issues that we need to deal with in our tax system so that we can address intergenerational policies, equality and an ageing workforce,” she said.
The independent MP, who represents the western Sydney seat of Curtin, said she spoke 10 times in the previous Parliament about the need for tax reform.
“It felt like nothing would ever happen,” Cheney said. “It’s now on the agenda, and I think the government and the opposition now have really three years, two and a half years in the lead-up to the next election, to put together a package and explain to the public why that’s going to solve the problems that we address and take that to the next election.”
Tax reform was raised at the government’s Economic Reform Roundtable, representing what Cheney called “a good first step” toward broader changes.
The government has faced repeated setbacks in Parliament on economic legislation, with the coalition and Greens blocking multiple housing policies and other measures.
Albanese cited those defeats Friday when asked about the superannuation policy.
“The Senate, like they’ve blocked housing policy, the Senate blocked a whole range of policies between the Greens and the Coalition,” Albanese said. “We hope that the Senate supports government policy whenever we put it up, including on this area.”
The Prime Minister defended his government’s record on delivering election commitments despite parliamentary obstacles.
“We go through, we’re methodical, we’re orderly, we say what we will do and then we do what we will say,” Albanese said. “What we’ve said.”
He pointed to recent legislative achievements including a two-year freeze on beer excise, cheaper medicines and changes to parental leave laws.
Community Response
Cheney said Australians are prepared for ambitious tax reform despite the political challenges.
“I think it is ambitious, but I also think that Australians are actually ready for some ambition,” she said. “People are seeing the challenges for young people in Australia now and recognise that they’re not getting a fair go.”
The MP emphasized that comprehensive tax reform requires time and community input.
“It takes time. It can’t be done overnight,” Cheney said. “I think the fact that tax was raised at the Economic Reform Roundtable was a good first step.”
What Happens Next
The government has not indicated when it might bring revised superannuation legislation to Parliament or what specific changes it might propose.
Cheney said she remains “really happy to look at different proposals” but emphasized that addressing the unrealised gains issue is essential for securing crossbench support.
“If they’re looking at other ways to do that, so that we’re not taxing unrealised gains or preferably indexing that threshold, I think that would be good news,” she said.
The standoff over superannuation taxation comes as the government confronts a packed legislative agenda and limited time before the next election, expected in 2028.
Political analysts say the government’s willingness to engage on modifications to the superannuation policy suggests recognition that the current proposal cannot pass Parliament in its existing form.
The delay in bringing the legislation forward has created uncertainty for financial planners and Australians with large superannuation balances who face potential tax changes without knowing the final policy design.
Treasury officials have conducted modeling on the proposed changes, according to Senate testimony, though the government has not released detailed analysis of the policy’s impact.
The original proposal aimed to limit tax concessions for the wealthiest superannuation account holders as part of the government’s broader economic agenda. However, the technical design issues identified by crossbench MPs have prevented the legislation from advancing.
Cheney said the government’s consultation with stakeholders demonstrates the importance of community input in tax policy development.
“What we are seeing here is that that needs to be done with community input and consulting stakeholders, listening, taking those views into account before putting together a package of tax reform,” she said.
The superannuation debate reflects broader tensions in Parliament over economic policy, with the government struggling to secure crossbench support for key legislative priorities.
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