Election 2025: Millions could be affected by Labor’s unrealised capital gains tax

More than 1.8 million people would be hit on superannuation tax on earnings and unrealised capital gains, new modelling shows.

Labor wants to lift the tax rate on superannuation accounts worth $3m, but the Greens are pushing for that to be lowered even further to just $2 million.

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More than 1.8 million Australians would eventually be hit by Labor’s unindexed superannuation tax on earnings and unrealised capital gains if the party agreed to the Greens’ demand to lower the threshold on accounts to $2 million, new analysis shows.

Labor wants to lift the tax rate on superannuation accounts worth $3m, but the Greens are pushing for that to be lowered even further to just $2 million.

Labor may agree if there is a hung parliament and has not ruled out bargaining with the Greens.

The tax, known as division 296, whacks another 15 per cent on earnings and unrealised capital gains in addition to the existing tax of 15 per cent.

Modelling shows that lowering the threshold from $3m to $2m would see 1,811,952 Australians stung with higher tax before they die.

Given the tax is not indexed to inflation under Labor’s plan, as each superannuants' savings rise then a new cohort would enter the $2m bracket each year and be subject to the higher tax rate.

If the threshold was dropped to $2m, then people who had $1.875m in their superannuation one year would find themselves with a higher tax rate of up to 30 per cent the following year if their fund delivered a 7.5 per cent return.

If the threshold remained at $3m and an individual had $2.8m in their superannuation they too would find themselves taxed at the higher 30 per cent the following year after a 7.5 per cent return.

The modelling, which is not produced or commissioned by the Coalition but from an industry group asking for anonymity out of fear of reprisal from a potential new Labor government, expects more than 500,000 people to end up being taxed at 30 per cent under Labor’s $3m threshold.

The Greens have promised to index the tax if the threshold is lowered to $2m but have not detailed how this would be designed.

The modelling uses ASIC’s Moneysmart calculator and Australian Taxation Office data and shows that 47,860 people already aged between 55 and 59 will end up paying the higher 30 per cent total tax on their superannuation earnings and unrealised capital gains.

More than 780,000 people under the age of 30 would also take a hit over their working life too.

Greens senator Nick McKim has said the superannuation earnings and unrealised capital gains tax would only apply to 0.7 per cent of super accounts, or about 100,000 people in the first year.

The $3m threshold would apply to 80,000 people in its first year, or 0.5 per cent of accounts.

Self Managed Super Fund Association chief executive Peter Burgess said reducing the threshold from $3m to $2m would “only exacerbate the unfairness of taxing unrealised capital gains”.

“It means even more people will be impacted by this tax on unrealised capital gains,” Mr Burgess said

“If the polls are right and Labor forms a minority government then the only way it can get this superannuation bill through would be with the support of the Greens.

“While they support it being indexed at $2 million, we don’t know what Labor would do.”

Mr Burgess said that given most superannuation policy is indexed to either Consumer Price Index, or Australian Weekly Ordinary Time Earnings (AWOTE) it would surprising to see Labor leave the new tax unindexed.

Under the tax, which Labor would like enacted by July 1, unrealised capital gains will include assets such as property and farms.

There are more than 24 million superannuation accounts in Australia and the prudential regulator has noted the superannuation system covers 78 per cent of the population – one of the highest levels of coverage in the world.