Treasurer Jim Chalmers's major overhaul of controversial superannuation tax plan has been welcomed by experts.
Chalmers announced on Monday that the Albanese government's tax on earnings of super balances of more than $3million will be indexed to inflation, and will no longer hit unrealised gains - or gains purely on paper.
However, earnings on super balances above $10million will be slugged at a higher, 40 per cent rate while earnings on balances between $3million and $10million will still be taxed at the 30 per cent.
Australians with less than that threshold will pay the normal 15 per cent rate.
The government expects the $3million threshold to affect about 90,000 super balances while the $10million threshold will capture about 8000.
Money educator Nicole Pedersen-McKinnon has called the reforms a 'stunning backflip', urging Australians to trust in their Super and invest in them.
'This seems to restore some sanity,' she told the Daily Mail on Monday.
'It also introduces some equity where incredibly rich people can no longer just stash cash and hoard their wealth in a tax advantage government funded scheme.
'Superannuation is a tremendous Aussie invention. We're one of the few countries in the world to have a mandatory retirement savings scheme.'
'I think this should give people the confidence to put in extra to their Super unless they're likely to hit those that $3 million threshold, in which case you might want to consider putting the rest elsewhere.'
The thresholds introduced by the Albanese government will be tied to inflation, relieving a major criticism of the earlier proposal that an increasing number of earners would be captured by the higher tax as wages and prices increase over time.
'We have always had in our back pocket indexation, or an indexation like this, in order to get it through parliament,' Chalmers said at a press conference in Canberra.
'For earnings on super balances between $3 and $10m, the rate remains 30 per cent.'
'The rate for over $10m becomes 40 per cent. So this is still a concessional tax arrangement, but it's better targeted.'
The government has also dropped plans to tax unrealised capital gains - a move that had sparked widespread backlash from accountants and retirees.
Unrealised gains are increases in the paper worth of assets that haven't yet been sold and critics claimed a tax would unfairly capture those with assets in self-managed super funds including farms and businesses.
Chalmers said the changes would make the super system fairer: 'As treasurer and as a government we always try to take feedback seriously.'
'We always try to find the best way through. We found another way to satisfy the same objectives.'
'It means a fairer superannuation system from top to bottom.'
Ms Pedersen-McKinnon said the reforms were welcome, with the previous plan to tax unrealised gains with no index being 'the most unpalatable idea ever'.
'It almost broke a type of social compact with Australians, where we said, 'We will let you keep our money and lock it away, because you are going to give it back to us when we retire',' she said.
'This idea of taxing unrealised gains and doing it in a way that wasn't in depth so that more and more people would get caught every year, was really just not cricket.'
'(But with) the new proposals, it's hard to argue that 30 per cent tax above $3million and 40 per cent over $10million is not fair. It's incredibly fair.'
The government will also increase the low-income super tax offset payment from $310 to $818 and raise the eligibility threshold from $37,000 to $45,000 from July 2027.
It means a bigger slice of the workforce will qualify - and they'll get a larger offset, too.
'We are helping lower income workers earn more, keep more of what they earn and retire with more too,' Chalmers said.
Starting July 1, 2027, workers with taxable incomes at or below $45,000 will automatically qualify for the new low-income super tax offset scheme.
While Labor had floated changes to super taxes two years ago, legislation has never been introduced into parliament due to opposition from the coalition and the Greens.
If passed by parliament, the changes would take effect from July 2026, a year later than the expected starting date of the earlier proposal.
The Grattan Institute's housing and economic security programme director Brendan Coates told the Daily Mail the policy was good news for Australians.
'It means that all low income taxpayers basically get a tax concession on their super contributions, which was no longer going to be the case because of the increase in the bottom tax threshold,' he said.
'That's a positive step to put small money in the pockets of low income earners in their super.'
But the other three policies have left Mr Coates concerned, highlighting that the changes will mean less cash in government funds.
'The government budgets will be under more pressure in the long run because we're not winding back excessively generous tax breaks for 80,000 Australians who have super balances exceeding $3 million,' he said.
'That's going to mean, over time, either higher taxes elsewhere, such as on income, or less spending on government services or higher budget deficits as a result.'