Imagine a high-income earner who makes just over $250,000 per year – a single-income household’s primary breadwinner, subject to the highest marginal tax rate. Under current superannuation rules, their employer contributions are taxed at 15 per cent, plus an additional 15 per cent surcharge, meaning they effectively pay 30 per cent tax on every dollar that enters their super fund. Over their lifetime, this individual diligently saves and invests, growing their balance to provide a self-funded retirement, which is supposedly the very goal of superannuation.

However, the government is not satisfied with this. If their balance exceeds $3 million, earnings on the portion above this threshold will be subject to an additional 15 per cent tax, including unrealised gains – a wealth tax in disguise. When combined with the existing contribution taxes and the 15 per cent death benefits tax levied on the taxable component of their superannuation, a significant portion of this person’s lifetime savings could be taxed at rates as high as 60 per cent in some cases. This isn’t progressive taxation; this is state-sanctioned confiscation.

Where is the fairness when politicians and public servants retire on lush, unfunded, taxpayer-backed pensions, while those who have worked hard, taken financial risks, and played by the rules are penalised for their success? Why should responsible savers be targeted while those benefiting from the public purse enjoy guaranteed benefits with no comparable tax burden?

The message from the government is clear: if you work hard, take personal responsibility for your financial future, and make prudent investment decisions, you will be punished. Meanwhile, those who have done nothing to secure their retirement will continue to rely on taxpayers to foot the bill for their age pensions. This is not just unfair – it is an economic disincentive that erodes the core purpose of superannuation.

Australia’s superannuation system was designed to promote self-sufficiency in retirement, yet the policies proposed in the Orange Book 2025 are steering it towards a punitive wealth redistribution scheme. If we continue down this path, high-income earners will have every incentive to explore alternative investment structures outside of super, depriving the system of capital and undermining the very foundation of retirement security.

Another contentious proposal is the recommendation that retirees allocate 80 per cent of any super balance above $250,000 to purchase a lifetime annuity. While annuities can provide a steady income stream, mandating their purchase restricts individual choice and fails to consider personal financial goals or unforeseen expenses. Critics argue that such a one-size-fits-all approach may not suit the diverse needs of retirees and could lead to reduced flexibility in managing retirement funds.

The Grattan Institute projects that these combined measures could save the federal budget over $10 billion annually. However, this focus on immediate fiscal savings may overlook the broader implications for retirement adequacy and the original intent of the superannuation system – to provide Australians with financial independence in retirement. By tightening tax concessions and imposing stricter regulations, there's a risk of diminishing the incentives for long-term savings, potentially increasing future reliance on the age pension.

Rather than punishing those who save and invest wisely, the government should focus on ensuring all Australians have a fair and equitable retirement system – one that does not rely on constant raids of private superannuation balances to fund political agendas. If the Grattan Institute and policymakers truly care about fairness, they should start by addressing the unfunded liabilities of their own generous retirement schemes before targeting those who are already paying more than their fair share.

Naz Randeria, managing director, Reliance Auditing Services