Proposed changes to high superannuation member balances
As Australia and the world starts to move forward from peak COVID-19 times, recouping the significant financial support provided during the start of the pandemic, has become a high priority for the government.
The government has announced a proposal to reduce the concessions available on superannuation for certain members, as one of its key mechanisms to claw back revenue in future budgets.
Current Rules
Currently, the tax rate which applies to all concessional contributions and investment earnings within a member’s superannuation fund is 15%, regardless of a member’s super balance.
This represents a concessional tax rate amount, in comparison to most individual marginal tax rates, and hence is why many individuals aim to get money into the low tax rate environment of superannuation.
New Rules
Under the government’s new proposed changes, members with superannuation balances above $3 million will face a higher concessional tax rate equaling 30%, as opposed to the 15% rate they currently enjoy.
This proposed start date for this change is 1 July 2025 and is estimated to impact around 80,000 super fund members, which have superannuation balances above $3 million in their accounts.
What items does the higher concessional tax rate apply to?
Applies to
- Investment earnings relating only to the proportion of a member’s superannuation balance above $3 million
- Unrealised gains, such as the increase in the market value of shares that have not been sold
Does not Apply to
- Investment earnings relating to the proportion of a member’s superannuation balance below $3 million
- Concessional contributions, either via employer superannuation guarantee or personal superannuation contributions
Conclusion
It is important to note that the above rules are still proposed changes at this stage, and such changes still require legislation to be passed in federal parliament.
If these changes do proceed, only future earnings from the effective date (likely 1 July 2025) would be subject to the higher concessional tax rate for certain members, with retrospective changes being ruled out.
Reach out to the advisors team at Link if you have any questions.