Treasurer Jim Chalmers introduced legislation to the House of Representatives on Wednesday morning which, if passed, will double the tax rate on superannuation accounts with balances between $3 million and $10 million to 30 per cent.
The tax rate on balances above $10 million will be increased to 40 per cent.
While super will still be taxed at a lower rate compared to income, the changes will reduce the magnitude of the concession, making the retirement savings scheme fairer and more sustainable, Dr Chalmers said.
"These changes will maintain concessional tax treatment for super across the board, but they make the system more sustainable by better targeting concessions for the biggest balances to help fund more super for people with the smallest balances," he said in parliament.
Labor promised lowering tax breaks for high account holders in its previous term but failed to win the support of the coalition or the Greens to get the bill through the Senate.
In October, Dr Chalmers announced tweaks to the original legislation, which initially only included the $3 million threshold and also operated by taxing the increase in the value of assets that had not yet been sold.
The contentious unrealised capital gains component was removed in the new legislation, after a backlash by farmers and tax experts, who warned self-managed super funds could be forced to sell illiquid assets like property to fund tax liabilities.
Unlike the initial proposal, the thresholds will be indexed to limit the amount of people impacted by the higher tax rates over time.
As the same time as high account holders are taxed more, low-income workers will benefit from a boost to the low-income superannuation tax offset.
The threshold for the offset will be increased from $37,000 to $45,000 to match the top of the second income tax bracket, while the maximum payment will also increase to $810.
"Voting against this bill would be a vote against a fairer super system," Dr Chalmers said.
Despite the axing of the unrealised gains component, the coalition has attacked the proposal as a money-grab while Greens are yet to offer their support to the changes.
With the Senate not due to sit until March 2, the Greens will use negotiations to press the government to extract more tax from wealthy superannuants, including by lowering the thresholds, increasing the tax rates or restoring the taxation of unrealised gains.
The changes to balances above $3 billion are set to come into effect from July 1, assuming the legislation passes parliament, while the offset changes are set to apply from mid-2027.
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