$3 million super laws and what they mean for you

In February 2023, the Federal Government let the dogs out, announcing a scaling back of the tax concessions for superannuation balances over $3 million.

The results of this Saturday’s election will determine if these changes are legislated and become law.

The legislation is called ‘Division 295’ and it proposes:

• From 1 July 2025, an additional 15% tax will apply to investment returns earned by superannuation accounts with a balance greater than $3 million at the end of the financial year
• The additional 15% tax is on top of the 15% tax already in place, bringing the total tax on super returns to 30%
• The extra 15% will only apply to the amount that exceeds $3 million
• Earnings that relate to the balance of up to $3 million will still be taxed at 15%

Based on ATO data, it is expected about 80,000 taxpayers will be affected by the above, however that’s based on todays data. With inflation, increases in superannuation guarantee rates (for employees) and future super balances, it could have far reaching effects in the not too distant future.

The main issues are:

• Legislation applies to total super balances
• Returns on super aren’t always realised. This is one of the nasty aspects of this legislation. You would be taxed an extra 15% tax on gains on your investments even if you haven’t sold them
• The plan is the additional 15% tax would be levied on the individual member, not the superfund

 

Author

Kim Jay