Labor plots a new way of taxing your retirement savings after millions of Aussies enjoyed a ‘super surge’

Super balances have had the best year since 2021 as Labor plots a new way of increasing taxes on retirement savings.

Balanced super options, oriented towards growth assets, enjoyed a 11.5 per cent median boost in 2024, new SuperRatings data showed. 

This was the best year since 2021 when Reserve Bank interest rates were still at a record-low of 0.1 per cent, with the Australian share market reaching an all-time high in early December.

It was also almost double the 6.7 per cent annual average since 2000. 

SuperRatings executive director Kirby Rappell said Australian super balances with a higher exposure to shares and a 60 to 76 per cent orientation towards growth assets, did particularly well.

‘This year will be the second consecutive year of strong returns as funds continue to deliver for members over the long term,’ he said.

‘We have continued to see strong performance in equity markets that have been the key driver of this return outcome.

‘Most of this year’s returns have come from share markets, which are now priced at historical highs both in Australia and internationally.’

Balanced super options, oriented towards growth assets, enjoyed a 11.5 per cent boost in 2024, new SuperRatings data (pictured) showed

The result for 2024 has marked a turnaround from the 4.8 per cent slump of 2022 when the RBA began the first of its 13 rate hikes. 

But the good news could be cut short with Labor still determined to double taxes on earnings to 30 per cent, up from 15 per cent, for superannuation balances above $3million.

This would apply from July during the accumulation phase of super saving, should the government strike a deal with minor parties in the Senate in early 2025.

That possible change would also be coming into effect after the next election, due by May 2025. 

Prime Minister Anthony Albanese and Treasurer Jim Chalmers also want to impose an additional 15 per cent tax on unrealised gains above that $3million threshold.

This means the likes of self-managed superannuation funds that had assets like property above the $3million mark would be taxed on those assets before they were sold.

That is a radical departure from the usual approach of taxing assets after they have been offloaded. 

Labor’s polarising plans stalled when Parliament wrapped up in November because the Greens didn’t think the government’s super plans went far enough – wanting the threshold reduced to $1.9million. 

This was the best year since 2021 when Reserve Bank interest rates were still at a record-low of 0.1 per cent, with the Australian share market reaching an all-time high in early December (pictured, a auctioneer at a property in Melbourne)

The government may try negotiating with the Greens again in February, in a bid to pass its Better Targeted Superannuation Concessions and Other Measures Bill before Parliament is dissolved for an election.

Mr Rappell said nervousness about the pace of interest rate cuts in Australia, and in the United States, could make 2025 a more difficult year for super funds.

‘A correction in share markets would have a strong flow on effect to member’s superannuation balances and members should be prepared to see ups and downs over the short term,’ he said.

‘Inflation, particularly in Australia, also continues to be persistent with Australian interest rates likely to come down slowly over time, and cost of living pressures remain elevated.’

Compulsory employer superannuation contributions are increasing on July 1 to 12 per cent, up from 11.5 per cent now. 

The futures market is now expecting three rate cuts in 2025, that would see the Reserve Bank cash rate fall from 4.35 per cent to 3.6 per cent for the first time since May 2023.