A recent Government announcement could affect superannuation balances above $3 million.

All superannuation balances over $3 million could attract an extra 15% Tax. This is on top of the current 15% on earnings made throughout the financial year, bringing the overall Tax payable to 30%. The proposal has sparked controversy within the superannuation industry, with some arguing it unfairly targets high net worth individuals and could discourage people from saving for retirement. Others however argue it is a necessary measure to ensure sustainability of the superannuation system and provide more funding for government programs.

When does it start and who does it affect?

If passed, it will first apply from 1 July 2025, with the first Tax liabilities due in the 2026/2027 financial year.

The proposed legislation affects all superannuation funds (including SMSFs) with member balances above $3 million, and will impact funds in both accumulation and pension phases.

How does it work?

The Tax will be applied based on the movement in member balance at the beginning and end of the financial year, and is a complicated formula to calculate. Importantly though, the Tax will be imposed on unrealised gains.

What if I make a loss?

If your fund makes a loss in a given financial year you can carry it forward to offset any Tax the fund might be liable for in future years.

What if I have multiple superannuation funds?

Your TSB includes your balances from all superfunds, and will determine if you exceed the threshold. Unfortunately, if your balance exceeds $3 million, you cannot withdraw amounts from your superannuation fund unless you have met a condition of release. Standard superannuation law limits any withdrawals from your fund unless you met a condition of release.

It is important to note that this proposal is not yet law and may still undergo significant changes before being implemented. We have a number of strategies in place to deal with the above proposal and it is important to seek professional financial advice to understand how these changes may affect you specifically.