Unpacking the Proposed Extra 15% Tax on Superannuation Balances Above $3 Million
In February 2023, the Australian Government announced that from 1 July 2025 total superannuation balances of $3 Million and greater would be taxed at 30% on the annual earnings. The current concessional tax rate for earnings of compliant superannuation funds is 15%. Importantly, the legislation is before parliament but is not yet law.
Answering the main questions to this proposed legislation…
1. What is my Total Superannuation Balance?
This figure includes all your superannuation balances if you have more than one superannuation fund, including defined benefit funds.
The additional 15% tax will be levied on individuals, which is why total superannuation balances (potentially across multiple funds) can be used for this tax.
2. How will Earnings be calculated every year?
Earnings is calculated as follows in the first year that the tax can apply – being 2025/2026:
+ Withdrawals
– Contributions (Net of Tax)
– Total Superannuation Balance (as at 1 July 2025)
If Earnings are negative in a year, they will be carried forward to future years to offset against any positive Earnings.
No, the additional 15% tax is payable on a proportion of Earnings. This proportion is the amount by which the Total Superannuation Balance exceeds $3 Million, as a percentage of the Total Superannuation Balance.
So, a person just exceeding the threshold with say $3.1 Million of net assets in their superannuation fund will have most of the taxable income taxed at the current concessional rate of 15%, with only a small proportion of Earnings (as expanded) subject to the additional 15% tax.
4. How do I keep my Total Superannuation Balance under $3 Million or what planning can I do to keep it under?
Importantly, withdrawals during the year do not affect the calculation of your Total Superannuation Balance for the year of the withdrawal.
We are working with clients to discuss different options to meet their individual needs on this topic.
5. What happens if my Total Superannuation Balance is over the $3 Million threshold but falls under it in future years?
If your Total Superannuation Balance is less than $3 Million on 30 June 2026 or on 30 June of future years, then the additional 15% tax will not apply to you for that financial year. Movements above $3 Million during financial years are irrelevant.
6. Does my superannuation fund pay the additional 15% tax?
Any tax payable will be levied to the individual members rather than the super fund. The member then can elect to withdraw funds from their super fund to pay the tax or simply fund the tax payment themselves.
Date: 30/08/2024
The Macro Group Limited AFSL:485843 Tax Agent Number 24 76 5236.
The information in this article contains general information only. We have not taken into consideration any of your personal objectives, financial situation or needs. Before taking any action, you should consider whether the general advice contained in this communication is appropriate to you having regard to your circumstances and needs, and seek appropriate professional advice if you think you need it. We recommend that you consult a licensed or authorised financial adviser if you require financial advice that takes into account your personal circumstances.