Super tax changes: The good, the bad and the ugly
Major superannuation changes are on the cards, but they’re not set to come into effect for years.
😃 The Good: The government gets more money
😔 The Bad: Changes don’t go far enough
😡 The Ugly:The damage has already been done
Treasurer Jim Chalmers has proposed removing tax breaks for those who make voluntary contributions to their superannuation.
At the moment, a person who makes voluntary contributions (above the compulsory 10.5 per cent taken from your pay) will only be taxed 15 per cent. Chalmers wants this to increase to 30 per cent if your super balance is above $3 million.
But how will this affect people who already have millions stashed away in super and does it even go far enough? Here's the good, the bad and the ugly.
This will help create more equitable retirement outcomes for all Australians, and the government will get more money.
Most people would agree $400 million is probably more than necessary for a comfortable retirement. That is actually the very real sum of money in one Aussie’s superannuation account.
Chalmers said fewer than 1 per cent of all superannuation accounts had more than $3 million and the tax changes would only affect around 80,000 people.
Changing the tax rate from 15 per cent to 30 per cent would also give the government around $2 billion more per year to play around with.
Super Consumers Australia said the changes would go a long way to addressing imbalances in the retirement system.
“Everybody agrees that the objective of the super system is fundamentally about delivering retirement incomes. These changes will go a long way towards ensuring that the system is better directed towards the retirement income needs of the majority of people,” it said.
So, essentially, the average Aussie won’t be affected by these changes at all and those who do probably have a lot of money anyway.
The changes aren’t enough to rein in ‘excessively generous’ tax breaks.
Brendan Coates and Joey Maloney from the Grattan Institute said the proposed changes didn’t go far enough and believed the tax break threshold should actually be lowered to include super accounts with $2 million or more.
“Wealthy people will continue to receive generous tax benefits from super, and younger people and those on low and middle incomes will keep footing the bill. Instead of only moving on super balances larger than $3 million, the government should set the threshold at $2 million,” they wrote in a blog post.
“There is no reasonable rationale for generous earnings tax breaks on balances between $2 million and $3 million. People with that much in super will have a very comfortable retirement without taxpayer support.”
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Anyone who already took advantage of the tax loophole will not be affected.
The proposed changes would not come into effect until 2025/26 and even if it did pass parliament and become law, it wouldn’t be retrospective.
That person who has $400 million in their superannuation account will have at least that, if not more, by the time the changes come into effect.
In fact, Chalmers said there were more than 17 super accounts in Australia with more than $100 million in them.
These Aussies could be thinking they’d better top up those accounts even more between now and July 2025, before the proposal could come into effect.
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