As they age, young Australians will be milked by this “hard reform” tax. Where are we at with all this taxing of our super? Is there a better way?

Because of the recent election result with Labor in control of the House of Reps, and the Greens the kingmaker party in the Senate, the Government’s super tax looks likely to slug 1.2 million people over the next 30 years. And whle Labor’s initial legislation only sees the super tax hit 80,000 people from the outset, it’s young Australians as they age who’ll be milked by this “hard reform” tax.

This accusation about the larger number of taxpayers who’ll pay this tax comes as the Coalition’s new Treasury spokesman, Ted O’Brien, says the Coalition is open to a deal on the super tax. He wants the proposal of taxing unrealised gains dropped or else his team won’t offer bipartisan support.

To add more spice to the mix, the Greens are wanting the super tax to start on earnings not over $3 million but on $2 million. Unlike Labor, however, the Greens are prepared to index this starting amount for increases in inflation.

The irony of the Greens proposal is that it would only hit an extra 16,000 super trustees or members in the first year, but a lot less over time because the starting point of $2 million will be indexed to inflation.

So, where are we now?

Try this:

1. Labor wants a super tax on earnings over $3 million with no indexation of this amount, which will capture 1.2 million young Australians as they age. Furthermore, Treasurer Chalmers wants the tax on unrealised gains, which all up will raise $2.3 billion for the Budget in year one.
2. The Greens want the tax to start at $2 million and it would be on unrealised gains as well. But it also wants indexation of this amount that will capture 16,000 Australians from day one but less than Labor’s proposal over time.
3. The Coalition wants unrealised gains dropped and they want the $3 million to be indexed.

The Coalition's O’Brien is basically saying if they support no taxing of unrealised gains and indexing the $3 million, then this wouldn’t be an issue at the next election because they supported the new and improved super tax.

The AFR’s Michael Read explained the relative threats from the Greens and Labor’s alternative policies. “Assuming an average inflation rate of 2.5 per cent, the Greens policy would become less punitive than Labor’s after about 16 years and negate economists’ concerns that average wage earners could be inadvertently caught by the increased super tax within a few decades,” he reported.

“Veteran budget watcher Chris Richardson said Labor’s super tax was not a good policy but, given the ‘terrible mess’ of existing superannuation tax concessions, it nudged the system in the right direction. Richardson said the Greens’ $2 million proposal was still not a good deal for people with high super balances, but it was a more certain deal given it is not clear if future governments will raise the unindexed $3 million threshold.”

Read also underlined why many people have problems with politicians. “The Australian Financial Review reveals last week that Albanese and other officials who began their careers before 2005 on defined benefit pensions will be able to defer payments of the new extra 15 per cent super tax on high-value retirement savings until they retire,” he revealed.

“Interest will be charged annually on the deferred tax liability at the long-term government bond rate, currently about 4.5 per cent.”

What the May 2 election has shown us is that we need a much stronger and credible Coalition to ensure Labor doesn’t get carried away with penalising hardworking successful people, or those who were ‘unlucky’ enough to be born into a wealthy family.

Of course, with its big majority, Labor could really reform the tax system by raising the GST to 15% and cutting our income tax, but that would really take guts.