The Australian government is preparing to present a superannuation tax plan that aims to impose an additional 15 percent tax on superannuation accounts exceeding $3 million, effective from July 1 of the next financial year.

The taxation policy targets higher earners, yet projections suggest a potential wider impact due to the non-indexation of the threshold.

Treasury estimates indicate that approximately 80,000 individuals, representing less than 0.5 percent of the population, would be directly affected by this policy by the financial year 2025-26. However, as superannuation balances grow and the threshold remains static, concerns arise that more individuals could eventually cross the $3 million mark.

Experts highlight that failure to index the threshold with inflation could lead many, particularly those early in their careers, to face unintended tax implications in the future.

Shane Oliver, chief economist at AMP, pointed out that as superannuation funds increase in value, individuals close to the threshold may begin to adjust their financial strategies to mitigate tax exposure.

This could involve withdrawing funds from superannuation accounts or reallocating investments, potentially leading to decreased overall investment in the economy, which might adversely affect economic growth and living standards in Australia.

While the government asserts that the plan primarily impacts high earners, some economists argue it could inadvertently affect average Australians as well.

The Australian Taxation Office reported that the average superannuation balances for individuals aged 60 to 64 in 2021 were $402,838 for men and $318,203 for women, indicating that a significant number could be closer to the new threshold than anticipated.

Furthermore, the proposed tax has raised concerns about its effects on the housing market, particularly as it includes taxation on unrealized capital gains within self-managed super funds (SMSFs).

This tax structure may compel individuals to reconsider their property investments, as they could face taxes on appreciated asset values without actual sales occurring.

Nicola Powell, chief of research and economics at Domain, noted that this may result in a shift from residential to commercial property investments, potentially increasing housing supply in the sale market while decreasing rental availability.

Powell compared this scenario to the effects of the potential removal of negative gearing, which some studies suggest would increase rental prices even while facilitating broader home ownership.

Oliver further articulated concerns regarding the availability of startup capital, positing that self-managed super funds often invest in emerging businesses and innovations.

A decline in such investment could stifle growth in startups, undermining entrepreneurial initiatives.

In defense of the new taxation policy, Treasurer Jim Chalmers emphasized its role in funding essential government services and maintaining budget sustainability.

Chalmers acknowledged differing public opinions regarding the tax but maintained that the endeavor is intended to enhance fairness in the superannuation system.