The proposal from Treasurer Jim Chalmers to hike taxes on superannuation funds would significantly impact around 50,000 Australians using self-managed super funds (SMSFs), according to a study conducted by the International Centre for Financial Services. The proposed measure seeks to double the tax concession rate from 15% to 30% on super funds exceeding $3 million. The report identified about 3% to 11% of affected SMSF members who would likely struggle to meet the added tax burden.
In delving into the financial ramifications, researchers scrutinized the financial data of over 720,000 individual SMSF members for the period of 2021-2022. With the proposed tax changes, an additional liability of nearly $89,000 per member was projected for 2021, which reduced to an approximate $83,000 per member in 2022.
Chalmers defends the change as being fiscally responsible – a remedial measure aimed at healing the budget. The proposal is projected to impact fewer than 0.5% of Australians, approximately 80,000 citizens.
Insisting that the primary aim is to support working individuals in attaining financial stability post-retirement, Chalmers stated, “More than 99.5% of Australians will still be entitled to the same tax benefits that facilitate greater superannuation savings for retirement.”
Under the existing financial system, superannuation earnings during the accumulation phase receive tax concessions of up to 15%. While this rate will still apply to accounts keeping under $3 million, balances above this figure will see an increased tax rate of 30% commencing July 1, 2025.
Additionally, unrealised capital gains will also be brought under the tax ambit, a move that ICFS researchers warn could eventually lower tax revenues.
SMSF Association CEO Peter Burgess voiced concerns about the unpredictable nature of the new plan, reiterating that wealthy members with minimal incomes could struggle to meet their additional tax burden. Burgess noted, “As unrealised capital gains grow while liquidity from previous tax payments decreases, this problem risk amplifying over time.”
The new tax measures, currently in the consultation phase and yet to be legislated, are projected to inject an extra $2 billion into the government’s coffers in the first year of activity.
