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Superannuation
SMSF Association Conference 2023 and Tax on high superannuation balances
2 April 2023
Yanli Ye, Manager and myself recently attended the 2023 SMSF Association National Conference at the Melbourne Conference Centre.
Over 2 ½ days Yanli and I attended sessions presented by the leading specialists in SMSF’s. These sessions included topics such as contribution and pension strategies, the importance of deeds and details of the most recent changes to legislation.
There was a special address from Hon Stephen Jones MP (Labor Minister for Financial Services) in the morning and later that day a special address from Hon Stuart Robert MP (Shadow Assistant Treasurer and Shadow Minister for Financial Services). Both generated a lot of discussion. It was during the following week that the Government made an announcement.
On Tuesday 28 February 2023, the Government announced that the superannuation fund concessional tax rate applied to accumulation phase earnings will increase from 15 per cent to 30 per cent for taxpayers with superannuation balances above $3 million, from the 2025–26 income year.
Individuals with total superannuation balances (TSBs) over $3 million at the end of a financial year will be subject to a tax of 15 per cent on earnings. This tax is in addition to any tax their superannuation funds pay on earnings in accumulation. This means that earnings attributable to balances above $3 million will generally attract a combined headline rate of 30 per cent. This measure will commence on 1 July 2025 and apply to the 2025-26 financial year onwards. Earnings corresponding to funds below $3 million will continue to be taxed at 15 per cent or less.
The individual will be liable for the additional tax of 15 per cent. The individual can choose to pay the tax themselves or can nominate their super fund, or one of their super funds if they have multiple.
Earnings will be calculated with reference to the difference between the individual’s total superannuation balance (TSB) at the start and end of the financial year, adjusting for withdrawals and contributions.
An individual’s TSB includes all of their superannuation interests and is not a separate figure for each interest — i.e. the $3 million threshold will be applied on a per-individual basis and not on a per-account or per-fund basis. The calculation of earnings includes all notional (unrealised) gains and losses, similar to the way superannuation funds currently calculate members’ interests.
Negative earnings will be able to be carried forward to reduce the tax liability in future years.
Please note that it is expected to only affect 0.5% of taxpayers or 85,000 individuals when it starts on 1 July 2025.
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Disclaimer
The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.
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