Treasurer Jim Chalmers’ super tax changes leave a $4 billion hole in the Budget leaving GST to fill the gap

So-called “tweaks” to Jim Chalmers’ superannuation plan will punch a multibillion-dollar black hole in the Budget that economists warn could be filled with an increase to GST or changes to tax breaks on investment properties.

The Treasurer on Monday walked back two key parts of the superannuation changes, some 30 months after first proposing them.

The changes mean that the $3 million threshold for the high tax will be indexed and unrealised or on-paper capital gains won’t be taxed.

In its first full year of operation, in 2028-29, the Budget bottom line will only be $500,000 worse off, compared with the original plan.

But that gap blows out to almost $1 billion once a new scheme to boost super top-ups for people on low incomes is taken into account.

Over four years, however, the Budget black hole then widens to $4.2b.

AMP chief economist Shane Oliver said the gulf would get worse over time due to the decision to index the $3m threshold, despite labelling that a sensible move.

He tipped possible further changes to superannuation or a tightening of negative gearing and capital gains tax on investment properties — all of which have previously been ruled out by Labor.

“(The tax plan) was seen as one way to partly plug the hole and deal with issues about intergenerational equity in the system,” Dr Oliver said.

“This adds to the pressure to find more ways to raise revenue to plug the hole.

“So some people might find that what they’ve saved here ... and don’t have to pay extra tax here, then they might end up having to fork up somewhere else.”

Dr Chalmers, who held a press conference on Thursday from a Brisbane pub, wouldn’t give a comparison for the reworked plan with a Parliamentary Budget Office estimate the original would have raised $43.9b over a decade.

“A major part of the difference between the billions of dollars which would have been raised under the original proposal and the billions which will still be raised under this proposal is the one-year delay (to the start date),” he said.

“We’ve already got a broad and ambitious agenda when it comes to tax reform. This is an important part of that but not the only part of it.”

University of Sydney tax law professor Michael Dirkis said it was incredibly difficult to wind back spending, especially on things like the NDIS and childcare subsidies, so “they’ve got to raise revenue”.

The problem was where to raise that revenue without upsetting too many people, or “plucking the goose before you make it squeal”, he said.

“At some point in time the geese are going to have to be caught and plucked,” he said.

“They’ve got to find money somewhere and the issue is where. The thing that was meant to pay for the NDIS was the super profits tax on the mining companies (which was unwound). That’s part of the problem.”

Leading tax policy expert Robert Breunig said the tax treatment of the family home was the “big elephant in the room” that no politicians wanted to talk about, including whether including it in means testing for pensions and aged care or shifting to broad-based land taxes.

He also suggested looking at lifting the GST rate and broadening its base but acknowledged that might not raise much revenue if it were offset with personal income tax cuts.

The likelihood of any of this happening was “small” in the current environment — “but surprising things can happen”.