Labor plans tax rise for highest super earners The extra tax would be limited to wealthier individuals with very large super nest eggs. Photo: Jessica Shapiro LABOR is considering a plan to increase the tax rate on superannuation earnings for the wealthy after ruling out imposing a new tax on super payouts. The Prime Minister, Julia Gillard, has closed off the option of taxing withdrawals by wealthy people aged over 60, heading off a lucrative line of attack pursued by the opposition in an emerging superannuation class war. The change to the taxation arrangement for fund earnings is being discussed in the lead up to the federal budget. The parameters of the change have yet to be fixed, but an informed source said it was possible the top 1 per cent of earners would be charged an increased rate of taxation during the so-called "accumulation phase." The extra tax would be less obvious than a tax on withdrawals and limited to wealthier individuals with very large super nest eggs. Super fund earnings are presently taxed at a flat rate of 15 per cent across all income groups. The change would see the creation of a new higher marginal rate for the top 1 per cent, leaving the vast bulk of superannuation accounts unaffected. One option is a tax rate of 30 per cent, which would still be concessional because it is below the top marginal tax rate. However a lesser increase is believed more likely. In the May budget, the government lifted the tax on superannuation contributions for Australians earning more than $300,000, attracting strong criticism from the opposition and the superannuation industry. The government wants to claw back part of the $32 billion in super tax concessions foregone by the Commonwealth and forecast to exceed $45 billion within three years. While no decision has been made, Fairfax Media believes the earnings proposal has found favour as a viable alternative to taxing withdrawals. On Wednesday, Ms Gillard moved to end a gathering scare campaign on that front, telling Parliament that Labor "will never remove tax-free superannuation payments for the over-60s." She said Labor had built the superannuation system and would always protect it. With rumours of change in the air, the Opposition Leader, Tony Abbott, called on Ms Gillard to join him in ruling out "negative and unexpected" changes to superannuation arrangements. The government is under pressure to replace declining revenue streams and find money to pay for big-ticket programs such as the National Disability Insurance Scheme and the Gonski school funding reforms. The new rate, if implemented, would be limited to as few as 100,000 retirees with accumulated nest eggs in the multimillion-dollar range. The move comes as superannuation policy emerges as a central election issue and a distinct point of difference in the philosophies of the two main parties. Question time on Wednesday was dominated by the opposition's focus on Labor's fiscal record, including previous promises by the Treasurer, Wayne Swan, and Ms Gillard last year that the budget would be in surplus in 2012-13. In a humorous moment carrying a sting in its tail, the shadow treasurer, Joe Hockey, welcomed Labor elder statesman Bob Hawke to the chamber as an observer, noting he was both a constituent in Mr Hockey's North Sydney electorate and "the last Labor prime minister to deliver a surplus."