A new consultation paper has been released by the Albanese government to seek feedback on its planned changes to taxation of high superannuation balances.
In February, Treasurer Jim Chalmers confirmed that the government intends to increase the concessional tax rate applied to accumulation phase earnings from 15 per cent to 30 per cent for individuals with super balances exceeding $3 million from the 2025–26 financial year.
“The modest adjustment we announce today means 99.5 per cent of Australians with superannuation accounts will continue to receive the same generous tax breaks, and the 0.5 per cent of people with balances above $3 million will receive less generous tax breaks,” the Treasurer explained at the time.
According to the government, the changes are expected to apply to less than 80,000 individuals and should generate approximately $2 billion in additional revenue in the first full year of operation.
The new consultation paper published by Treasury on Friday provides an overview of the proposed model for identifying who would be affected, how tax would be calculated, and what the changes would mean for individuals and trustees.
Treasury noted that the policy would apply to those who have a total super balance above $3 million across all of their accounts, including SMSFs and APRA-regulated funds.
“Earnings on the part of an individual’s TSB over $3 million will attract an additional 15 per cent tax. Earnings for this purpose will be calculated using a formula. Where an individual has multiple superannuation accounts, a combined earnings amount will be calculated,” it said.
The additional tax, applied directly to an individual, would be determined by the Australian Tax Office (ATO), which already receives a wide range of information from super funds.
“Once the ATO has calculated the tax liability, a notice of assessment will be sent to the individual. This is separate to the individual’s personal income tax,” Treasury said.
Affected individuals would be able to elect to pay the tax directly using personal assets, or by releasing money from their super account.
Since the majority of members would not be affected by the changes, Treasury noted that the approach outlined in the consultation paper seeks to avoid imposing significant and costly systems and reporting changes that would impact other members.
Treasury has posed a number of questions in relation to the proposed changes, including how an individual’s total super balance and earnings above $3 million would be calculated.
Interested parties have been invited to submit a response to the consultation until 17 April.
The super tax changes received a mixed response from funds, industry bodies, and other groups upon their announcement. While some welcomed them as a step towards fairness and sustainability in the super system, others accused the government of shifting the goalpost.
More recently, CPA Australia said the government was acting prematurely by introducing the changes at the same time as it consults on an objective for super.
“This is a piecemeal change that should not be made in isolation. Constant and piecemeal changes undermine the community’s confidence in the superannuation system and government policy,” the accounting body said.
According to CPA Australia, there are still many questions that need to be addressed regarding the implementation of these changes and any potential unintended consequences.
“There is a real risk average Australian families and small business owners will be adversely impacted, particularly due to the lack of indexation of the $3 million threshold and the taxation of unrealised capital gains,” it said.
“As the $3 million index is not indexed, more people will be captured and impacted over time.”
The accounting body urged the government not to proceed with the changes until an objective of super is defined and legislated.
“These changes must be considered as part of a broader discussion regarding superannuation tax, concessions provided and the complexities created by the myriad caps, thresholds and limits currently in place. Any discussions regarding superannuation reform must also consider the interaction with the tax and transfer system,” CPA Australia said.
