Labor’s Superannuation Tax Policy: A Ticking Time Bomb for the Housing Market and Future Generations

At the heart of the policy is a new 15% tax on unrealised gains for superannuation balances over $3 million. While Labor insists the policy will affect only around 80,000 high-balance super holders, new modelling from Wilson Asset Management reveals a much graver reality: 5.4 million Australians under the age of 35 will be impacted by the time they retire. That includes today’s 19-year-old apprentice and the 27-year-old graduate just entering the workforce. And the catch? The $3 million threshold won’t be indexed to inflation, meaning the real value of that cap will shrink each year.

Why This Matters for the Housing Market

Housing investment and superannuation are closely linked in Australia. Many Australians, especially self-managed super fund (SMSF) holders, use their super to invest in residential and commercial property. With the new tax applying to paper gains, not just realised ones, many will be forced to sell assets prematurely often property to stay under the cap and avoid hefty tax bills.

This could trigger:

• An artificial oversupply of investment properties, as retirees or SMSFs offload property to avoid being hit by the tax.

• Reduced investor demand, particularly in long-term real estate assets like build-to-rent developments or regional housing, which require patience and stable capital.

• Upward pressure on rents, as fewer investors hold rental stock in super, reducing supply in an already tight market.

All of this could culminate in a distorted housing market, where decisions are made not based on sound investment strategy, but on fear of taxation on gains that haven’t even been realised.

A Blow to Australia’s Economic Engine

Superannuation funds are one of the largest pools of private capital in the country. They fuel investment in infrastructure, innovation, and housing development. By taxing unrealised gains, the government is eroding the incentive to invest in higher-risk, long-term ventures like technology start-ups and small to medium-sized enterprises (SMEs)—the very businesses that underpin Australia’s future economic growth.

Wilson Asset Management rightly warns that this tax “threatens to undermine the foundations of Australia's economic dynamism.” Without patient capital from super funds, many Australian start-ups may look offshore for investment, taking jobs and innovation with them.

The Intergenerational Time Bomb

Make no mistake: this isn’t just a tax on today’s wealthy retirees. It’s a stealth tax on tomorrow’s middle class. A 25-year-old with no super today, earning an average income, could easily exceed the $3 million cap by the time they retire. Under the current rules, they would face tens or even hundreds of thousands of dollars in annual taxes, regardless of whether they actually accessed any of that value.

Consider this:

• A 19-year-old earning $54,000 today is projected to retire with $3.49 million.

• A 27-year-old graduate earning $90,000 could surpass the cap by 2065.

• A 34-year-old with $180,000 in super today would be hit by 2058.

This tax creates a disincentive to save, and undermines the very idea of superannuation as a vehicle for long-term, self-funded retirement. What’s the point of growing your nest egg if it becomes a tax target before you even crack it open?

No Indexation, No Fairness

One of the most egregious aspects of this policy is the refusal to index the $3 million cap to inflation. While income tax brackets are routinely adjusted for inflation to prevent bracket creep, superannuation caps will be left to erode in real terms. This is not only inconsistent but inherently unfair.

By 2050, $3 million will not hold the same value it does today. Yet Labor’s refusal to index this threshold guarantees that more and more Australians through no fault of their own will be swept into a tax regime never intended for them.

A Call for Rethink

Australia’s superannuation system is the envy of the world, designed to reduce reliance on the age pension and reward those who plan ahead. But this new tax punishes prudent investment and alters the incentives that make superannuation work.

If passed, Labor’s super tax will:

• Distort the housing market

• Penalise long-term savers

• Constrain capital for Australian innovation

• Place an unseen burden on future generations

It’s a radical policy masquerading as targeted reform. And unless it’s seriously reconsidered, it risks gutting the retirement dreams of millions of ordinary Australians, undermining the housing market, and setting a dangerous precedent for future fiscal policy.

Let’s hope Parliament and the Australian public can see through the smokescreen before it’s too late.