The Government has announced proposed changes to superannuation. Its important to note that the Government is putting up a proposal and it will only come into effect should this Government be re-elected at the next Federal election. The proposal will need to go through the usual parliamentary process and if successful will only come into effect from 1 July 2025 and will not be retrospective.
What are the changes?
The Government is proposing changing the tax treatment of superannuation member accounts that have greater than $3 million. Currently, earnings on these balances pay a concessional tax rate of 15% on the earnings of the superannuation fund. The Government would like to increase this to 30%, instead of 15%.
Interestingly, the Government has also signalled their intention that the $3 million threshold will not be indexed. So while the proposed change seeks to capture 80,000 Australian superannuation members or only 0.5% of the superannuation membership base, the fact that they have not indexed the threshold means that in the next 10 – 15 years many more working Australians with 10.5% mandatory superannuation contributions will be captured.
Effecting this change will create a raft of administration complexities and will add wood to the fire that Governments are always tampering with superannuation and retirement incomes policy. The devil is always in the detail and we will need to wait and see what is actually being proposed.