After speculation that changes to the superannuation rules could form part of the upcoming Federal Budget, the Government has made a pre-emptive announcement that they will look to introduce a new ‘cap’ for super. The new cap, which is proposed to commence from 1 July 2025 will limit the tax concessions available to those with a superannuation balance above $3 million.
Under the current system there is no limit on the amount of money that can be held in a superannuation account and contributions as well as earnings are taxed at a maximum concessional rate of 15%. From 1 July 2025, it is proposed that earnings on accumulation balances greater than $3 million will be taxed at a higher rate of 30%, creating a two tiered tax system.
At present, there is limited information as to how this will be implemented, leaving many with questions as to how the proposal will work in practice. The Government have indicated that they will undertake targeted consultation on implementation of the proposals between now and the Federal Budget in May 2023. Draft legislation will follow, and the measure will then form part of the policy proposals that are taken by the Government to the next Federal election.
The announcement has been welcomed by some, who argue that the proposed changes would create a fairer system and ensure that everyone pays their fair share of tax. However, critics argue that the $3 million cap is too low and affects individuals who have built their superannuation balances through prudent saving and investment strategies as well as making contributions in line with the rules, rather than just relying on tax concessions. The Government has also indicated that the cap will not be indexed which will likely result in it impacting a larger number of people than what is currently being suggested.
As with any proposed changes to the superannuation system, it is important to carefully consider the potential impact on all stakeholders and ensure that any changes are fair, balanced and equitable while maintaining confidence in the system.
If you would like more information about the superannuation changes, please contact your usual Mazars advisor or alternatively one of our experts via the firm below or on:
Author: Clive Todd
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