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May 27, 2025
Treasurer Jim Chalmers has been accused of double standards by allowing Prime Minister Anthony Albanese and veteran public officials to delay paying the new superannuation tax until retirement. Interest will be charged annually on the deferred tax liability at the long-term government bond rate, currently about 4.5 per cent.
In contrast, ordinary superannuation fund members and self-managed super fund members will be forced to find the cash to pay the annual tax immediately during their working lives and retirement. News p4
Chalmers accused of 'double standard' on PM's pension tax Treasurer Jim Chalmers has been accused of double standards by allowing Prime Minister Anthony Albanese and veteran public officials to delay paying the new superannuation tax until retirement.
Interest will be charged annually on the deferred tax liability at the longterm government bond rate, currently about 4.5 per cent.
In contrast, ordinary superannuation fund members and self-managed super fund members will be forced to find the cash to pay the annual tax immediately, during their working lives and retirement.
The tax rate will be doubled to 30 per cent on returns for superannuation balances above $3 million, including unrealised capital gains on assets that have not been sold.
Liberal MPs, teal independent Allegra Spender and actuary Michael Rice have all criticised the special rules, first revealed by The Australian Financial Review yesterday.
But former federal and NSW Treasury official Robert Carling said it was ridiculous to apply the new tax to defined benefit pensions as they were typically already taxed at marginal income tax rates on withdrawals in retirement, less a 10 per cent tax offset.
Under the existing rules before the new tax, Albanese would be entitled to a maximum pension of about $360,000 a year and pay about $122,000 in tax on this, an average tax rate of 34 per cent, Carling estimated.
''This new tax is designed for defined contribution accumulation funds, and trying to make some equivalent for defined benefits doesn't make sense,'' said Carling, senior fellow at classical liberal think tank the Centre for Independent Studies. ''There is no fund, there are no contributions and no earnings on the defined benefit plan the prime minister is on.
''There is no justification for including them, but they are including these defined benefit funds for political reasons because they could not be seen to leave them untouched.''
Old-style defined benefit pensions are unfunded schemes for public officials paid from general government revenue. Contributions and earnings are not taxed, but withdrawals are.
This is the opposite of the defined contribution, or accumulation, funds most people are now in.
Defined benefit pensions are typically based on the number of years a public official has worked, their age, career earnings, final salary and, sometimes, their spousal situation.
Politicians and public servants in defined benefit pension schemes who began their public service careers before 2004 and 2005, respectively, will be able to defer their tax payments until they start receiving pensions in retirement at age 55 or older.
Rice, the retired former owner of actuarial firm Rice Warner, said working public officials with pension entitlements calculated to be worth more than $3 million should have to pay the tax immediately before retirement.
''I guess the argument is they may not have the money available, but SMSFs with a property investment still have to pay it.''
Liberal senator James Paterson said the deferred payment revelations in the Financial Review exposed a disparity.
''Australians hate double standards [particularly] when it's politicians writing rules for themselves that apply differently to how they play for the rest of Australians, that's exactly what Jim Chalmers is doing,'' Paterson said on Nine's Today show yesterday.
''He's writing in a special rule for his boss, Anthony Albanese, who has a defined benefit pension, who won't have to pay this tax until retirement.
Unlike every other Australian who is subject to it.'' Paterson called for the tax to be ''binned''.
A spokesman for Chalmers said that ''under the proposed legislation, commensurate treatment is applied to defined benefit interests to ensure equivalent tax outcomes to accumulation interests''.