‘Sanity has prevailed’: business reacts to Jim Chalmers’ super tax backdown

Business leaders have praised Treasurer Jim Chalmers’ dramatic backdown on Labor’s super tax plan, saying the move will protect productivity and investment.

Treasurer Jim Chalmers on Monday. Picture: AAP

Business and political leaders said sanity had prevailed after Jim Chalmers dumped the most controversial elements of Labor’s super tax grab following months of pressure from investors over the attack on retirement savings.

Wilson Asset Management founder Geoff Wilson, a vocal critic of the government’s original super tax plan, said federal Labor’s backdown was a good result for business and productivity.

“It looks as though sanity has prevailed, which is really pleasing. It’s good for Australia, good for Australian business and good for productivity, because the consequences were going to be very negative,” Mr Wilson said.

“The government choosing to index the threshold means 8.1 million Australians will not be captured by bracket creep. It also means a $94.5bn drag on productivity we calculated as deadweight losses can be mitigated.

“This means more capital to invest in technology, and more opportunities for workers to be more productive and better paid.”

The Treasurer on Monday unveiled sweeping changes to Labor’s proposed tax on high-value superannuation balances, crucially dumping the plan to target unrealised capital gains on super balances above $3m.

The government’s new plan will see a 30 per cent tax applied only to realised gains, while the $3m threshold will be indexed. A new 40 per cent tax on balances above $10m will also be brought in under the proposed changes, expected to be legislated in 2026.

One of the architects of compulsory superannuation, Bill Kelty, said Dr Chalmers had listened to his critics in reversing proposed tax changes that threatened to distort the super system.

“Taxing unrealised gains and not indexing was bad policy. Now he’s got good policy,” Mr Kelty told The Australian.

“He should be commended for being on the side of good reformist policy, which makes superannuation fairer. It’s taken him a while to get there, but that’s OK. He’s trying to reform the system and, ultimately, he has – without silly tax changes.”

Mr Kelty, a former ACTU secretary, said in June he was opposed to the proposed taxation of unrealised gains and the $3m threshold should be ­indexed. Veteran UBS dealmaker Brett Paton, who had warned Labor’s tax was a “wrecking ball” for small and ­medium-sized business capital, said the move avoided a broader investment hit.

“Taxing paper profits was always going to hold back investment in illiquid early stage high growth companies in Australia,” said Mr Paton, the former UBS and Citi dealmaker who with his team assisted in raising more than $200bn in capital for companies.

“That was inconsistent with rhetoric about innovation in our country. And it was going to punish farm families who are a steady ship in our nation building.”

Clime Investment Management founder John Abernethy said Labor’s backdown on taxing unrealised gains in super was a commonsense move, as he criticised the government for wasting so much time on its flawed original super tax grab plans.

“Chalmers has changed a bad policy into something which is common sense,” Mr Abernethy told The Australian. “But it makes you wonder why the bureaucracy went on this journey of coming up with taxation schemes that make no sense and are completely against taxation law in Australia.

“We’re back now to where we should have been in the first place. So why did we go on that three-year journey?”

Mr Abernethy said a higher tax on super balances above $10m was a good stop-gap measure but that ultimately the government should force people with very high super balances to move excess funds out of super.

Former head of the NSW council of trade unions Michael Easson said the reforms were fair and equitable. “Super was never set up to be a tax haven for the mega wealthy. The Treasurer has struck the right balance. Jim Chalmers deserves credit for steering the debate to a sound conclusion, that supports the principle of universal super.”

Ord Minnett managing director Karl Morris said he was glad common sense prevailed: “I compliment the Treasurer on listening to industry and making a complex structure less complex. This is a good decision,” he said.

Retail billionaire Gerry Harvey had also been a high-profile critic of the policy. “There was just too much opposition to it from too many people. It would’ve been a political nightmare had they gone ahead with it. The consequences would’ve been too much,” he said.