Time for the Treasurer to front up on Prime Minister’s super tax

The Albanese government’s superannuation tax changes under Division 296 are being sold as a way to ensure the wealthiest Australians pay their fair share. But when you dig into the details, it’s clear there’s one set of rules for typical Australians and another for the Prime Minister.

Most Australians have their super in a defined contribution scheme. In a DC fund, what you get in retirement depends on how much you put in, how well your investments perform, and the fees you pay.

It’s transparent: you can log into your account and see the balance in real time.

If your super balance goes over $3m, Labor’s proposed tax kicks in, and you get slugged with a tax on the unrealised gains.

Now compare that with a defined benefit scheme, like the one the Prime Minister has.

Instead of a balance that goes up and down with the market, the pension payout is fixed – guaranteed by taxpayers. It’s calculated based on salary and years of service, not market performance. This is why these pensions are called “defined” – the benefit is predetermined, regardless of how the market performs.

Here’s how it gets murky. Under Division 296, anyone with more than $3m in super is supposed to pay tax on unrealised gains. But for DB pensions, the value isn’t simple to see. It’s not sitting in an account. It’s calculated using actuarial methods that estimate its lifetime value.

And guess what? Those methods are not included in the legislation.

The draft regulations talk about a few different methods – such as the “Family Law Method”, “Vested Benefit Method” and the “Maximum Commutation Amount”. But for commonwealth pensions such as the PM’s, the exact method isn’t listed.

The fund in which the PM is a member, the Parliamentary Contributory Superannuation Scheme, doesn’t have a calculation method in Treasurer Jim Chalmers’s legislation.

If Chalmers were serious about applying this new tax to politicians such as his boss, he would put the parliamentary scheme in the legislation with a clear method.

He hasn’t. Instead, the explanatory memorandum to the legislation embarrassingly says: “The regulation-making power reduces the complexity of the bill by removing the technical matters from the primary law.”

Translation: we won’t subject the PM’s pension to parliamentary scrutiny. Chalmers is hiding behind bureaucratic fog, leaving Australians guessing: we don’t really know how much the PM’s pension is worth under Division 296, or if it even crosses the $3m threshold. At a minimum, given the conflict of interest, the Treasurer should be able to say how much his PM will pay.

Even worse, Chalmers openly admits the PM’s DB pension “doesn’t pay a cent in tax until it starts paying out”. That could be years away.

While typical Australians are getting slugged for unrealised gains, the PM’s pension grows quietly in the background, untouched by Division 296.

If you’re a typical Australian with a DC super fund, your balance is valued at market rates every year. If you’re over $3m, you get taxed.

But the PM’s DB pension? It’s “valued” based on actuarial guesses, not the market. Because the method isn’t clear, it’s possible the true value of such pensions is hidden, slipping under the $3m line and avoiding tax.

The Treasurer has given himself a regulation-making power so he can set up the rules for his boss whenever he feels like it without any parliamentary approval required. Simply put, Chalmers will just “make” the regulations and they will be law.

That’s not all. Because the DB scheme doesn’t pay tax until it pays out, Chalmers is effectively giving the PM a free pass on Division 296 – he’s letting it grow tax-free while everyday Australians get hammered on gains they haven’t realised. It’s a loophole so big you could drive a campaign bus through it. Again, the explanatory statement makes it clear sitting commonwealth judges will not be subject to the tax while they are in office. The term used is “while employed”. But Chalmers’s statement makes no mention of sitting ministers. Are they in or out for unrealised gains while they are “employed” in parliament?

Why does it have to be so murky? If Chalmers and the PM believe in transparency, they should have no problem revealing the PM’s likely tax bill. They should show us the details.

Andrew Bragg is the Coalition spokesman for home ownership.

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