Fewer than 1% of households with multimillions in super could struggle to pay Labor's tax, study finds

The Guardian

2 days ago

Fewer than 1% of households with multimillion-dollar super balances could struggle to pay for Labor's additional tax on retirement balances above $3m.
New ANU research also reveals that households liable for the extra earnings levy have 12 times the wealth of other households, including an average of $3.2m outside super and the family home. They also have more than two-and-a-half times the disposable income.
Ben Phillips, an associate professor from the ANU's Centre for Social Policy Research, said the analysis undermined claims that many individuals would struggle to find the cash to pay for the proposed 15% earnings tax on balances over $3m, which is applied to notional gains rather than realised profits.
Phillips said he had done the research to inform what he called the 'unprecedented' public debate of a relatively minor policy change that affected a very small proportion of wealthy Australians.
'These are very wealthy people with a lot of other assets, and also with a lot of income. It would be very, very surprising if all but a small handful of people would struggle to pay this tax,' he said.
In particular, Phillips and his colleague Richard Webster, a senior research officer, wanted to test claims that taxing unrealised gains could force some to sell big assets – most notably farms – to pay the impost.
With the farming lobby group mounting a campaign against the super tax, the research estimated about 2,400 people with large super balances are farmers.
The farming lobby has claimed that cash-strapped but asset-rich farmers could be forced to sell farm land to raise money to pay the tax, which is calculated on the annual notional change in the value of their super balances.
The modelling of ABS survey data showed that only 0.6% of the estimated 87,000 individuals with large balances, or 500 people, could struggle to find the cash to pay for the extra earnings tax.
'They are sort of 'unicorn' cases, and even then we don't know what's in their super accounts,' Phillips said, which he reckoned were likely to include enough liquid assets to pay the tax.
'That's not to say it's necessarily a good tax, but we are not seeing any barriers to these people paying a bit of extra tax on their super.'
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The paper models a scenario where an individual with $4m in super records a 10% gain, which – assuming for simplicity no contributions or withdrawals – incurs an extra tax of about $19,000.
If that extra tax is more than 10% of the household's disposable income and other wealth (that is, wealth not in super or in the home), then that household fails the stress test.
In this case, the household could struggle to pay the tax if they are also unable to easily pay the tax from their super savings.
The modelling suggests the median high super balance household has annual disposable income of nearly $250,000, versus $95,000 for all households, and nearly eight in 10 own their own home outright.
Two-thirds of the estimated 87,000 people with high super balances are men, three in four live in a capital city, and over half don't work.
'We really need to question why people have so much money in super for a start, when you only need enough to give you a comfortable retirement,' Phillips said.
'You also have to question – given the nature of super, where it's about getting money when you need it – why would you have large amounts of illiquid assets [assets not easily converted to cash]? That's not really what super is about. That seems to be more about a tax haven, rather than a saving vehicle for your retirement'