Why Super Just Became an Even More Important Retirement Tool

On 1 July 2027, one of the biggest changes to investment tax in decades comes into effect, and understanding it now better equips you to plan for the future. While super has seen its own recent changes through the Division 296 tax on individual balances above $3 million, these new capital gains tax changes reinforce that it remains one of the most tax-effective structures for building retirement wealth.

What is changing

The changes are now law. Under the new rules, the 50% capital gains tax discount ends for investments held in your own name, through a family trust or in a partnership. Instead, the cost base of your investment (broadly, what you paid for it) is adjusted for the rise in inflation over the time you hold it, and for most people, the growth above that adjusted cost base is taxed at a minimum of 30%. It applies to shares, managed funds and investment properties alike.

Two eras, one important date

The growth you have already built is protected. For investments you own on 30 June 2027, growth up to that date keeps the 50% discount and is not subject to the 30% minimum tax, even if you sell years later. Only growth after that date is taxed the new way.

That makes the value of each investment on 30 June 2027 a figure you may rely on for decades. Strong reporting and record keeping behind your portfolio, together with an adviser working alongside your accountant, means you are well positioned to manage the impact of these changes.

Because growth up to 30 June 2027 keeps the current treatment, the date does not necessarily need to drive your decisions. Selling earlier also does not avoid the new rules, as the future growth on any money you reinvest in your own name will be taxed under them. At Hewison Private Wealth, whether to sell an investment comes down to the investment itself and your personal circumstances. That means looking at its fundamentals, the diversification it provides, the role it plays in your portfolio over the long term and how it fits with your goals.

Why super matters more

Super is not affected by these capital gains tax changes, which widens the gap between investing inside and outside super. Here is how a capital gain on a long-held growth investment is taxed:

• In your own name: generally at least 30% on future growth.
• In super while you are building your balance (accumulation phase): 15%, or effectively 10% for assets held for more than 12 months.
• In super while it pays your retirement income (pension phase): 0%, up to your personal transfer balance cap. This is the maximum amount of super you can place into the pension phase, and you can check yours in your ATO account through myGov. If you are starting a pension for the first time, your cap is currently $2.1 million. If you started one earlier, yours may be lower.

Add tax-free withdrawals once you have retired after 60, and super becomes the structure where your investments can grow, be adjusted over time and fund your retirement with the least tax along the way. Getting the most from it is where strong planning makes the difference.

Getting the balance right

If you have always invested in your own name because super felt too locked away, it is worth a second look. For some people, that may mean putting more into super over time than they have in the past, revisiting salary sacrifice arrangements or making sure they are using their contribution caps effectively each year.

The trade-off is still access, as money in super generally cannot be touched until retirement. That is why the right answer is rarely all or nothing. It is keeping enough outside super for flexibility, while building super deliberately for the long term.

Questions worth asking your adviser

• Am I making the most of my contribution caps, including any unused amounts from previous years or the ability to use future years’ caps early?
• Over time, how should my investing be split between super and outside it?

The bottom line

The end of the 50% capital gains tax discount and the new 30% minimum tax do not change the fundamentals of a quality investment. They do call for more deliberate planning around your investment structures and where future investments may be best held, and for many people, super is a key piece of that plan.

To understand what these changes mean for you, speak with your Hewison Private Wealth adviser and start the conversation.

This information is general in nature and does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you and seek personal financial and tax advice before acting.