Taxing unrealised gains on investments is incredibly messy and goes against the spirit of investing, so it’s good to see the federal government has had a rethink of its proposed new tax changes on superannuation balances over $3 million.
The tax will now be based on realised capital gains, along with interest and dividends.
But that’s not the only change to the original proposal.
A limit set
There will now be two superannuation balance tax thresholds:
- Earnings on balances above $3 million will attract a 30 per cent concessional tax rate (balances under $3 million remain at 15 per cent).
- Earnings on balances above $10 million will be taxed at 40 per cent.
Both the $3 million and $10 million thresholds will now also be indexed in line with the Consumer Price Index and will increase in $150,000 and $500,000 increments. There will also be a cap on how much you can transfer into a transition-to-retirement component.
The government reckons around 90,000 superannuation accounts will be caught by the $3 million balance threshold, and another 8,000 will have the $10 million balance tax applied.
What super is actually for
As I’ve said before, I don’t believe massive superannuation balances should benefit from the same concessional tax treatment as the average Australian. Super was designed to help people save for a comfortable retirement – not to serve as a tax haven for the ultra-rich.
Let’s not forget, the country and all taxpayers effectively subsidise these tax concessions. We’re the ones paying for it. And we shouldn’t be footing the bill for the generous tax breaks going to people with superannuation balances over $3 million or even $10 million.
They’re more than wealthy enough to look after themselves.
More super news
Another important superannuation change also happened this week, affecting the Low Income Superannuation Tax Offset. This offset ensures low-income earners don’t pay more tax on their super contributions than they do on their regular income.
From 1 July 2027, the maximum offset will increase to $810, up from the current $500, and the income eligibility threshold will rise from $37,000 to $45,000.
This change will mean approximately 3.1 million Australians will be eligible to receive the offset.
Pay day super laws are also before parliament and it is hoped the new legislation will put an end to lost super. Unpaid super costs working Australians a staggering $110 million a week in unpaid retirement savings.
Payday Super is simple – instead of super contributions being made quarterly, employers will be required to pay super at the same time as wages.
It is proposed to roll out 1 July 2026 and will be a reform to the Superannuation Guarantee Act.
