Treasurer Jim Chalmers announced today he will cap superannuation tax breaks for accounts with more than $3 million. Currently, earnings from super in the accumulation phase is taxed at a rate of up to 15%. Under the proposed changes, balances above $3 million will be taxed at 30%.
This change will affect around 80,000 Australians with balances of more than $3 million and the changes will take effect after the next election in the 2026 financial year.
For people who have used the superannuation system to their advantage previously and have accumulated over $3m then this news is probably alarming. So, let’s break it down.
Why the number of $3m?
It would appear that treasury have crunched the numbers to get best return on the decision whilst not affecting the retirement planning done by the majority of Australians. The $3m number is per member so for a couple the limit of $6m in a concessionally taxed environment I think is still attractive.
What happens to the funds over $3m?
The government has said the tax will double to 30% from the current 15%. Interesting that this will cut out some of the franking value of tax refunds for the larger funds which was a tax target for labor not that long ago. I can see this will be easy to manage with Self Managed funds but the pooled and industry funds will be scratching their head as to how to implement this policy effectively and not disadvantage the smaller account holders.
Are Capital Gains affected?
On first look it appears that the capital gains concessions are largely unchanged at the moment which is 10% but they have not ruled out any CGT changes in the future.
What do we do with funds in super over the $3m?
On face value it appears that whilst the CGT concessions remain then there is an advantage to maintain in the super environment. The same asset protection benefits apply which can be an important consideration for members.
What is interesting is the alignment of the new 30% tax in super (for over $3m), to the company tax rate and to the prospective personal tax rate changes coming in the 24/25 tax year. Under these changes individuals can earn up to $200,000 a year before they get above the 30% tax bracket.
The devil will be in the detail but I am sure with these changes there will be plenty of discussions on superannuation strategies and how to how best to limit the impact of any change.
For any advice specific for your circumstances call the team at Boutique Advisers on 08 9381 8779.
Gary Hasler is the Managing Director of Boutique Advisers and works with highly successful individuals and families, providing strategic financial advice. Gary specialises in working with generational family businesses, executives and family office clients as well as high level professional athletes. Gary is passionate about working with Boutique clients in a collaborative way, providing clarity and confidence, and helping them navigate their financial life.