The government has announced that from 1 July 2025, earnings from superannuation balances over $3 million will attract a 30% concessional tax rate, doubling the current 15% tax rate.
Why?
In its media release, the Albanese Government reasoned it is making our superannuation system more sustainable and fairer. They expect to raise a further $2 billion each year in revenue from the 80,000 people with superannuation balances over $3 million.
While part of Labor’s election campaign included not making any changes to superannuation, they argue that by postponing the effective date until after the May 2025 election, they are not breaking this commitment.
How?
The $3 million balance is per person, will not be indexed, and you can continue to maintain funds above this amount in superannuation accumulation mode. Under the proposed changes the earnings will capture unrealised gains, with the new higher tax apportioned over the fund.
For example, earnings on a $6 million fund in accumulation mode would attract 50% at the existing 15% and 50% at the new 30% rate. It is estimated that with franking credits and capital gains tax discounts the effective rate of tax on these balances over $3 million will be nearer 22%.
What to do?
We continue to review these proposals and discuss potential strategies that may be applicable. These include changing the mix of investments within a super fund to target more tax effective investments, considering alternative investment vehicles, building other family members’ superannuation and lifetime gifting. However, until the government provides more detail on these changes, we recommend maintaining a watching brief for now.
Should these changes worry you, or you would like more detail, please contact us.
Simon Briggs is a Director at Keep Wealth Partners.
Keep Wealth Partners Pty Ltd (AFSL 494858).
