13 December 2022
by David Prichard
- Related topics
Superannuation and the rules attaching to contributions and withdrawals has long been an area of legislative change, making it difficult for people to plan properly. Whilst this appears to have settled down in recent years, comments by Assistant Treasurer, Stephen Jones at a recent AFT Wealth and Super Summit, has raised the prospect of more changes.
The Assistant Treasurer stated in his speech – legislating a clear objective for superannuation, was needed and this will then enable a “meaningful conversation” (political speak for change) around the taxation of superannuation.
The renewed focus appears to be the result of a small number of high value funds with 32 SMSF’s holding more than $100m in assets with the largest SMSF having over $400m. Changes to the superannuation rules in 2017 prevent taxpayers contributing more into superannuation if their total balance exceeds a transfer cap which is $1.7m for 2022-23. As such, the question must be raised as to whether the meaningful conversation is appropriately timed or correctly targeted.
Prior to the recent Federal Budget announcement, the Assistant Treasurer noted that the Labour government was open to capping superannuation balances at $5m. About 11,000 Australians have more than $5 million in superannuation should therefore be watching this space very carefully.
If the government decides to limit superannuation balances, debate will likely shift to the appropriate level at which to cap accounts. Currently, retirees with more than $1.7 million in super can leave their excess funds in their accumulation account and receive a concessional tax rate of 15 per cent, well below the top marginal tax rate of 45 per cent.
The Assistant Treasurer provided further food for thought noting that those who support the status quo will need to demonstrate how concessional tax arrangements for high balance super funds (presumably over $5m) meet the common objective. Whilst those who argue for change will need to show how that new approach meets the objective. This may be the government, through higher tax collections with a removal or limitation of concessional tax rates on superannuation balances.
It would not be a surprise to see major changes announced in the 2023 Federal Budget. We will continue to keep you updated on any changes that are announced.
If you have any questions, please don’t hesitate to contact your Engagement Partner.