Proposed changes to superannuation taxes before Parliament

We recently wrote about the Government proposal to levy additional tax for those with $3M+ super balances. This legislation is now before parliament, and we provide a reminder about it below.

It is important the new tax isn’t due to start until 2025-26.

It’s not law yet and there’s an election in the meantime. At this stage, it is sensible to adopt a wait and see approach.

The Australian Government is proposing a doubling of the tax rates on superannuation earnings for those with $3M+ super balances in the 2025/26 tax year, which will see rates reach up to 30%.

Under the earnings calculation, the ATO will be using an individual’s total super balance to calculate their earnings, which means it will include unrealised gains.

The new Division 296 tax will be levied at the individual and at 15% on a percentage of the individual’s super earnings equal to the percentage of their total super balance above $3m, with no indexation. The tax can be released from the super fund to facilitate payment.

As it stands, all superannuation earnings in the accumulation phase are taxed at a 15% concessional rate, and the government has confirmed that this rate will continue for those with balances under the threshold.

What should I do if I am impacted?

If this impacts you, it’s important to remember that you still have until 1 July 2025 until the changes come into effect, so there are some strategies you can explore before implementation:

• Moving super to a spouse’s account. If your spouse’s balance is under the cap, you may be able to maximise it by moving super into your spouse’s account. However, it’s important to note that any changes to conditions of release are yet to be announced, and it’s likely that there will be conditions set around this for people with $3M+ balances.
• Investment via a trust structure. Setting up a trust structure to invest your super earnings where distributions are paid tax effectively to beneficiaries may be a suitable option.
• Retain funds in your company. For those with a private company, it may make sense to retain the funds in the company and draw fully-franked dividends to leverage the 25% tax rate.
• Invest in a personal name. For those with a lower marginal tax rate, this can be an effective strategy to reduce tax obligations.
• Bring forward inheritances. You may choose to withdraw part of your super now and gift it to your children rather than waiting until after death; you can even do this as a gift to your children’s superannuation funds to ensure the money is maintained for their future. One potential pitfall to be aware of with this strategy is that your money might be caught up in any future family law disputes.

Seek advice

Apt Wealth Partners is a superannuation expert, helping you structure your super, navigate changes and weather storms. We stay across impending super and tax legislation changes – so you don’t have to. Our advisers began working on strategies for impacted clients well before the announcement was made, enabling them to act immediately and make the most of their money.

If you could use that level of support with your finances, talk to Apt Wealth Partners today on 1800 801 277 or info@aptwealth.com.au.

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.