Proposed Amendments To Superannuation Tax Concessions
Australian Treasurer Jim Chalmers has announced plans to increase tax rates for individuals with superannuation account balances of over $3 million. The move is aimed at improving budget sustainability and equity.
The current tax rate of up to 15% on earnings from superannuation in the accumulation phase will continue for all balances below the $3 million threshold.
From 2025-26, future earnings for balances above $3 million will be taxed at a concessional rate of 30% instead of the current 15 per cent. But the next potential devil in the detail is the news that Treasury wants to tax UNREALISED gains , in your super fund.
It is estimated that around 80,000 people will be affected by this change. The policy is set to take effect after the next federal election.
According to government figures, tax breaks on superannuation cost the budget around $51 billion in forgone revenue. Currently, the government charges a 15% tax on superannuation fund earnings during the accumulation phase.
The proposed increase to 30% will only apply to accounts with balances of $3 million or more during the accumulation phase. Tax-free retirement phase earnings on funds with balances up to $1.7 million will remain unchanged. Balances above this cap will be treated as being in the accumulation phase and taxed at 15%.
Labor has faced accusations of breaking election commitments, having pledged before the election that it had no plans to change superannuation. The Coalition vowed to oppose changes to superannuation tax breaks. Liberal backbencher Russel Broadbent has suggested that the Coalition should consider the policy if it would help with budget repair, but insisted that the government needed to take the policy to the public instead of just legislating it.
Fewer than 1% of superannuation accounts have balances of over $3 million, and the average balance of those accounts is close to $6 million. Mr. Chalmers emphasized that the average account balance of about $150,000 would be unaffected by the proposed changes. He also noted that some superannuation accounts had balances of over $100 million.
Mr. Chalmers said that he had no plans to index the $3 million threshold for higher tax rates, but Treasury officials would consult with stakeholders on that ahead of the May budget. The proposed change would generate approximately $2 billion per year for the government.
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