Government begins consultation on super tax changes
Treasury's clampdown on tax concessions for superannuation balances greater than $3 million has been laid out in its draft legislation and is now opened for consultation.
From 2025-26, the proposed law states that for members with total superannuation balances of $3 million, the concessional tax rate of 30% will apply. Those with less than $3 million will be taxed at 15%.
The proposed changes housed under two draft legislations - Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 and Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023 - cover APRA-regulated funds, self-managed super funds, and exempt public sector schemes.
Treasurer Jim Chalmers says that the "modest adjustment to apply after the next election will affect only a handful of people".
"The 0.5% of people with superannuation balances above $3 million will still receive tax breaks, just slightly less generous. The remaining 99.5% of Australians with superannuation accounts are not affected at all."
Members with negative superannuation earnings from balances above $3 million will be carried forward and will then be used to reduce the amount of super earnings in future income years.
"The change will not alter the amounts of money people can put into super, and it applies to future earnings - it's not retrospective," Chalmers says.
"The amendments are consistent with the government's proposed objective of superannuation, to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way."
The consultation period runs until October 18.
HLB Mann Judd wealth management partner Michael Hutton said in a recent Financial Standard podcast that the proposed changes have many pain points.
An analysis of Australian Taxation Office data by the Financial Services Council found a significant portion of Australian taxpayers will breach the cap in their lifetime and 500,000 individuals currently saving for retirement or already retired could be impacted if the cap remains unindexed.
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