Peter Dutton has described Labor’s plan to reduce tax breaks on superannuation balances larger than $3m as a “quasi inheritance tax”.
The description was made days out from polling day, as the major parties tore apart their opponent’s policies in a last-ditch effort to win votes.
“TheLabor partybelieves in an inheritance tax every day of the week. It’s part of their socialist agenda,” Dutton told Sky News on Wednesday.
“This is a quasi inheritance tax, call it for what it is, that’s the reality of it.”
Let’s break down whether the Labor policy fits such a definition.
Labor’s policy to limit tax breaks on earnings on superannuation balances larger than $3m wasannounced in 2023, but the government failed to secure crossbench support during the term.
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The policy proposes taxing earnings on super balances over $3m at 30% – double the 15% in place now.
Importantly, those with large super balances only pay that higher rate on earnings above the $3m threshold.
Anthony Albanese told the National Press Club on Wednesday he is sticking with the policy, while noting it will only affect 0.5% of the “superannuation population”.
“It won’t mean they don’t get concessions, it just means the concession isn’t as large,” he said.
What happens next will depend on the makeup of the next parliament.
Many developed countries impose a form of inheritance or estate tax on assets flowing out of a deceased estate, such as money or property.
There are only marginal differences in how inheritance and estate taxes operate, and Australia has neither.
Japan’s inheritance tax – one of the largest among developed economies – rises to 55% for large sums. The US has a federal estate tax of up to 40%, coupled with additional inheritance levies imposed by a handful of states.
It’s noteworthy that many of those with inheritance taxes, which include the UK, France and Germany, aren’t socialist. The levies were generally embedded into economies many generations ago and are now viewed as revenue-raising mechanisms for governments, regardless of underlying ideologies.
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Brendan Coates, program director for economic policy at the Grattan Institute, a public policy thinktank, said it’s “complete nonsense” to describe Labor’s superannuation policy as an inheritance tax.
“The only way you can conceive of this as an inheritance tax is if you think the purpose of super is to pass on money to your kids, but that’s no different to any other asset that anyone holds,” said Coates.
“You could equally say that income tax or capital gain taxes are inheritance taxes. Every tax by that definition is an inheritance tax.”
The final days of an election campaign are rich with “vibes and scare campaigns”, as one policy analyst told Guardian Australia, describing Dutton’s comments.
There is a reason the opposition leader has gone after this particular policy.
Opponents of Labor’s super plan point out that the $3m threshold is not indexed, which means it would capture more people each year as income and asset prices increase.
While a modest number of Australians have more than $3m in their retirement accounts –estimated at about 80,000 people, mostly aged over 60 – workers with aspirations of one day accumulating such a sum may also oppose Labor’s policy.
The proposal to tax “unrealised gains” – increases in value of an unsold asset – on high-value super accounts is also contentious, drawing criticism from different cohorts including parts of rural and regional Australia.
Farming groups are among those who are concerned their members could face cashflow problems if forced to pay tax on agricultural properties held in self-managed funds.
Yet, outside politics, even the fiercest critics of the plan don’t describe it as socialist-styled inheritance tax.