HEWISON INSIGHTS

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HEWISON INSIGHTS

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Hewison Insights
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Superannuation is back in the spotlight.

Alison Dellow
Wealth Adviser
1 Mar 2023

Any announcement of changes to superannuation, the reduction of tax concessions for super and generally how super is, or will be taxed in the future, naturally causes anxiety, angst and even frustration. Yesterday’s announcement was no different, the goal posts look to have been moved again. So, what do we know and how does it impact you?

The Albanese Government has proposed changing the tax treatment of those with large super balances that exceed $3million. However, Prime Minister Anthony Albanese stated that there will be no changes to superannuation during this current term and that the proposed changes would only come into effect from 1 July, 2025 after the next Federal election, and once approved by parliament and legislated.

When you are working and making contributions to super, your super balance is held in ‘accumulation’ phase. Under the current rules, earnings on balances in this accumulation phase are taxed at 15%. The Government has proposed changing this tax treatment, but only for members with large super balances. Individuals with a balance of $3milllion or above, would attract a tax rate of 30% after 1 July 2025.

For example, Jackie has $4million in super (accumulation phase). The earnings on $3million would be taxed at the current concessional rate of 15% and the earnings on the additional $1million would be taxed at 30% (in the future).

With yesterday’s announcement, it is not clear if pension accounts (those individuals who have retired and draw a pension from super) would be included in the $3million.

Currently, earnings on balances in retirement phase aren’t taxed at all. We are yet to see if this will still be the case – the devil truly is in the detail, but we are sure there will be clarification in the weeks and months to come.

Before the announcement, most super funds had advocated for a $5million cap balance including Funds like Australian Super, HESTA, Care Super and Aware Super, while retail fund Mercer suggested $3.4million.

According to the Australian Financial Review, 99.5% of Australians would be unaffected by the change leaving around 80,000 people (the remaining 0.5%) that are expected to be impacted. Prime Minister Anthony Albanese said ‘tough decisions’ were needed in the current economic climate. This move is expected to generate annual revenue of $2billion.

Superannuation has seen many changes over the years and while the tide keeps turning, we will continue to ensure we maximize our client’s position with a firm eye on their futures and what’s in their best interest.

 

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