“Backflip” is a lazy journalistic cliché. Looking at every policy decision through the lens of imagined leadership tensions is equally unhelpful to the media-consuming public. Both are news of little consequence.
The news of consequence about last week’s superannuation announcement, on the other hand, was: what was done; how was it done; why it needed doing; and what was not done.
Yet headline after headline talked of Treasurer Jim Chalmers doing a “backflip” over superannuation – from the staid Australian Financial Review to the rabid right Sky News, from the regional to the metropolitan.
The alleged “backflip” was the change from the original plan to increase the tax on the earnings of balances over $3 million from 15 per cent to 30 per cent. Under the new plan the $3 million would be indexed and any part of it that was unrealised capital gains would not be taxed.
And behind it all, in this media game, was Prime Minister Anthony Albanese, like the ghost of Bob Hawke, pushing back against an ambitious, reformist Treasurer by “humiliating” him or “rolling” him.
Inconsequential and speculative rubbish. Incidentally, “backflip” is the wrong term. A “backflip” is a somersault where the performer ends up in the same place as they started. And they land on their feet – as, I would argue, Chalmers did on this occasion.
Before we look at what was actually done, some background would be helpful. The big end of town, The Australian Financial Review, and The Australian, which largely serve the sorts of people who would have super accounts larger than $3 million, opposed any change whatever and wanted the tax rate to stay at a juicily low 15 percent.
But it was a hard one to argue. Most pub frequenters would think $3 million is more than enough to retire upon and that it would be fair enough to tax earnings on amounts above this more heavily.
So, instead they campaigned almost exclusively against the two elements of the original plan that were unfair and poorly thought out – no indexation and the taxing of unrealised capital gains.
The last bit is poorly understood. Every year, superannuation funds have to be audited, and a new value put on their assets. After accounting for pay-outs and contributions the increase from one year to the next is deemed to be earnings and taxed at 15 percent. Under the original plan that would change and the earnings on amounts over $30 million taxed at the higher rate of 30 per cent.
That would be of little consequence to big funds buying and selling investments all the time, but it was a big deal for self-managed superannuation funds (SMSFs) with only a couple of members and which often only have one or two major assets, say a farm or a business, or a couple of properties, or a share portfolio.
When the annual audit is done on an SMSF and the notional value of the total fund is increased, suddenly the SMSF is deemed to have made a big profit equivalent to the difference in total value of the fund over the year, and the fund has to be taxed on that difference, even though there is no actual cash in the bank to show for it.
The media campaign bit, and Albanese did not like it. So, he asked his Treasurer to fix it before going away on a brief holiday.
Well, Chalmers did fix it. He allowed indexation and he removed tax on unrealised capital gains. “Back flip,” they all screamed.
But he did two other things. He boosted tax concessions for low-income earners, and he increased the tax rate on the earnings from balances over $10 million to 40 per cent.
The latter move blind-sided the big end of town. In one stroke, Chalmers has largely reversed more than two decades of the transmogrification of superannuation from a purely retirement scheme to a sophisticated tax-avoidance and inheritance-management scheme. That transmogrification began when the Howard Government introduced self-managed super funds in 1999.
Rather than Albanese pushing back against Chalmers, Chalmers deftly stepped around the over-cautious, do-nothing Albanese to effect the most comprehensive tear down of one of the manifold vote-buying, help-the-rich Howard Government policies that we have seen for 20 years.
After these changes, superannuation will no longer be a tax-avoidance scheme for the very wealthy. It will return to being purely a scheme to provide dignified retirement for working people. And will return the scheme to one that reduces the drain on the public purse by reliance on the old-age pension. It will remove a tax rort that costs the Budget almost as much as the pension itself.
What was not done? First, the much-needed concessions to low-income earners (mainly part-time women) were not indexed. The bottom end does not have lobbyists wandering the corridors of power in Parliament House nor friends in the Murdoch media. Were they calling for the same principle of indexation for the low end of town as they were for the high end of town? Not a word of it, the hypocrites.
The other thing not done was to end the whole SMSF scam. Chalmers should have ended the creation of any new SMSFs.
Another element to this saga was the way it was done. So much policy these days seems to be pulled out of the hat like a rabbit. The policy is hatched by a few key senior ministers. It then goes to Cabinet. It then gets announced. Often the partyroom does not even get a say, let alone any widespread community debate.
If the original plan had been more widely debated, perhaps the brawl over indexation and taxing unrealised gains could have been avoided.
On the other hand, if proposals are put out for discussion, it gives time for campaigning media and lobbyists – which are heavily weighted in favour of the already wealthy – to campaign in their interests against the public interest.
There is no way the 40 per cent tax on earnings of balances over $10 million would have made it to government policy in that environment.
Part of the answer would be to prohibit corporate political donations so political parties cannot be bribed or blackmailed into acting against the public interest. Also, all politicians’ diaries should be open and detail who they met and what was discussed.
The 40 per cent super tax is good policy, but there is a long way to go to make Australia’s tax system fairer, more efficient, and more effective.
Crispin Hull
This article first appeared in The Canberra Times and other Australian media on 21 October 2025.