State MPs, officials exempt from Labor’s superannuation tax

State MPs and high ranking officials will be exempt from Jim Chalmers’s tax on unrealised capital gains affecting superannuation funds over $3m under a defunct pension scheme.

Treasurer Jim Chalmers. Picture: David Clark/NewsWire

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State MPs and high ranking officials will be exempt from Jim Chalmers’s tax on unrealised capital gains affecting superannuation funds over $3m under a defunct pension scheme.

Amid mounting criticism of Labor’s plan to tax high-value superannuation balances from business leaders, the Treasurer confirmed on Sunday there were constitutionally enshrined exemptions for some state government officials.

Dr Chalmers has previously said federal politicians would be exempt from the reforms, which will increase the tax paid on superannuation balances over $3m from 15 to 30 per cent to fund government programs.

But it would take a national referendum to get rid of exemptions for former state premiers, ministers, governors, department heads, judges and magistrates.

Environment Minister Murray Watt said the May 3 election landslide result had handed Labor an “endorsement” from the Australian people to pass the super tax reforms, adding that the measures would impact only one per cent of Australians.

“The reality is we will be relying on that taxation revenue to help meet some of our other priorities, like lifting bulk billing rates in GP clinics and supporting people with cost of living,” he told Sky News. “That money has to come from somewhere, and we think this is a fair way to do that.”

Senator Watt conceded there would be a small group of former officials who would be exempt under the constitution, with individuals with a high enough super balance to be captured by the changes still benefiting from some tax concessions.

“We’re of course, not going to be introducing laws that are in breach of the constitution and will be struck down,” Senator Watt said. “But what we are planning to do … is to reduce the tax concession available for a very small number of people with extremely high superannuation balances. People will still get a concession on their superannuation. It just won’t be quite as generous as it is at the moment.”

The Australian understands that a referendum would need to be held to reverse the exemptions for state MPs and other officials.

The passage of the tax reforms through the federal parliament now appears certain after the election increased Labor’s representation in the Senate, meaning the Greens now hold the numbers required to pass legislation without crossbench support. The Greens have demanded Labor lower the threshold to super balances of $2m to make tax fairer.

The proposed tax on unrealised capital gains has sparked fears it could be used as a Trojan horse to grow the government’s tax revenue. The nation’s largest retailer Gerry Harvey branded the reforms as “stupidity of the highest order” that were motivated by Labor’s desire to generate revenue.

Dr Chalmers has cast criticism of the legislation as being driven by partisan interest and the changes themselves as “modest”.