As you have most likely heard, the Government has proposed to amend the tax rates that apply to earnings associated with large superannuation account balances.
We wanted to send this short note to clarify the proposals:
- Changes like this are often proposed, but will undergo a process in order to actually be passed into law and to work out and confirm the detail around how the changes will actually be implemented.
- The increased tax rate is likely only to apply for a member that has in excess of $3M in their specific member account within a Super Fund. This can mean that a couple with a Self Managed Super Fund with a combined balance of say $5M are not impacted, where each member’s balance is less than $3M.
- The extremely beneficial zero tax rate on super earnings in pension phase will continue to apply, as will the concessional maximum tax rate of 15% in accumulation phase. Again, it would only be in the case that a persons balance is above $3M that the excess (amount above $3M) will have a maximum tax rate that increases from 15% to 30% on the earnings. This is still lower than the highest marginal tax rate for those that hold significant investment assets outside superannuation.
- There is still a lot to work through for the Government to clarify the specifics around the rule changes. However, they are not expected to take effect until July 2025, meaning we and our clients have more than 2 years to assess any potential implications and, where required, adjust a clients strategy on a case by case basis.
- The initial view is that generally, these changes will have little to no impact on most people; and superannuation will remain the most tax effective environment for your retirement savings.
We remain available if you have any questions or would like to discuss your individual circumstances in relation to these proposed changes or any other matters.
