On 28 February 2023, the Government announced a proposed change to superannuation tax concessions for those with superannuation balances over $3 million.
This change is proposed to take effect from 1 July 2025, and is subject to the passage of legislation.
What is the proposed change?
The proposed change will impose an additional 15% tax on individuals with a Total Superannuation Balance (TSB) over $3 million at the end of the financial year (first tested on 30 June 2026). The tax will only apply to earnings on superannuation balances above $3 million and will be levied on the individual. The individual will have the choice to pay the additional tax from personal savings or from their superannuation balance.
The proposed change is expected to initially affect less than 0.5% of individuals with superannuation. However, there was no clarity on whether the $3 million amount will be indexed, which if it isn’t the change will affect more people as time passes.
General considerations:
· The change does not limit how much an individual can retain in accumulation and does not require individuals to reduce their superannuation balance to be below $3 million.
· An individual’s total superannuation balance includes interests held in accumulation and income streams. The $3 million threshold applies to an individual’s total superannuation balance. A SMSF with a total fund balance of $3 million, with 2 members each holding a 50% share, will not be impacted by the proposed change, as each member would only have $1.5 million as a total superannuation balance.
There is no call to action just yet for those that this change will impact. If the legislation is passed, then strategies may be assessed on an individual’s situation to see if there are ways to minimise the impact of the proposed change.