You have probably heard the recent Labour announcement earlier this week of significant changes to super that may impact you.
On 28th February 2023, the government announced that from 1st July 2025 a 30% concessional tax rate will be applied to future earnings for superannuation balances above $3 million.
As of yet, this cap has not gone through the parliamentary process, however the reasoning behind the changes, according to the Labour government, were to create a more sustainable and fairer superannuation system.
For a small percentage of Australian’s, the ATO will levy an additional 15% tax on ‘earnings’ for each person on superannuation balances over $3m over each financial year minus withdrawals and contributions. In addition to this, tax will also be liable for ‘unreleased gains and losses’ every year. As a result, this may result in cashflow issues.
It is noted that this will particularly affect the self-managed superfund industry as balances from these funds tend to be higher.
Individuals will have the choice of either paying the tax out-of-pocket or from their superannuation funds. Individuals who hold multiple superannuation funds can elect the fund from which the tax is paid. On a positive note, the $3m will not be indexed for inflation, meaning it will stay $3m until it is changed by future law.