On 28th February 2023, the Labor government announced that from 1st July 2025, the tax on future superannuation earnings for balances above $3 million would double from 15 percent to 30 percent. Although this measure is not yet legislated and requires further consultation with the super industry and other stakeholders, the overhaul will undoubtedly impact the earning potential of high-net-worth individuals.
Prime Minister, Anthony Albanese, in his announcement stated that the proposed changes would not change “the fundamentals of our superannuation system”, adding that instead the reform was designed to “strengthen the system by making it more sustainable”. The federal government expects the move to bring in an extra $2 billion in tax revenue in its first full year, helping to improve the budget’s bottom line and ensuring that tax concessions are more equitable. Treasurer, Jim Chalmers, said that during a time when “persistent and growing spending pressures in health, the NDIS, aged care and of course defence” exist, the proposal aims to ease some of those budget pressures.
Treasurer Chalmers added that the purpose of Australia’s superannuation system is “to deliver a dignified retirement for working people” but that a small number of people have “balances well beyond what’s required for a comfortable and dignified retirement”. While the federal government maintains that they are not trying to diminish anyone’s hard-earned superannuation balance, they want to ensure that the tax system is fair for all Australians.
The shakeup will affect 0.5 percent of the Australian population, equating to just under 80,000 superannuation-rich individuals. The overhaul will effectively limit the earning potential of wealthy individuals and will be particularly noticeable in the self-managed super fund industry where superannuation balances tend to be greater.
Treasurer Chalmers wants to make it clear that the government is “not going out of our way to begrudge” anyone who has “made a lot of money, or saved a lot of money, or [has taken] advantage of the tax breaks that are legitimately available to them”. He said “it’s just about how generous the tax concessions are” on accumulated super balances and that the proposal will ensure “responsible economic management” by the Labor government.
If you’re concerned about how this proposal may affect you or would like to take a proactive step in managing your superannuation, please get in touch. Abbotts are here to provide you with peace of mind in your financial life. Contact our expert team today.