Superannuation tax changes ‘almost guaranteed’ to be in budget
With Minister Stephen Jones making moves to bed down the objective for super, changes to superannuation tax concessions are likely to be “front and centre” in the May budget.
Earlier this month, Minister for Financial Services Stephen Jones announced that the government would soon be releasing a consultation paper on the objective of super and that superannuation.
He also stated that superannuation tax concessions would be one of the areas he’d be looking at ahead of the federal budget in May.
Speaking in a recent episode of the SMSF Adviser Show, Smarter SMSF chief executive Aaron Dunn said it is now “almost guaranteed” there will be measures relating to superannuation tax concessions in the May budget.
“I’ve seen him talk on several occasions about the topic of the $5 million cap. Now, whether it’s a $5 million cap or something that uses that kind of mechanism we’ll have to wait and see,” said Mr Dunn.
“What he has made clear the whole time though, is that they want to bed down this objective of super and that that objective of super is ultimately going to say is that superannuation is not for estate planning purposes. That will enable them to [establish] this cap around balances within superannuation. So the reality is this is front and centre.”
Mr Dunn said that Labor is likely “testing the waters” with the $5 million balance cap by leaking it to the media.
“When you hear the narrative that’s being used, that it’s only going to impact 11,000 people in superannuation and the discussion about $100 million balances, the pub test here suggests that this is where it’s going to land,” he said.
The $5 million cap on superannuation balances has been pushed by a wide range of industry bodies and superannuation funds operating in the APRA-regulated space including AIST, ASFA and funds such as Hesta.
AIST has proposed that individuals with a total superannuation balance of more than $5 million across both accumulation and pension stages should be required to withdraw the excess amount by 1 July 2024.
Other groups have alternatively proposed that where an individual’s investment earnings exceed this cap, they should be taxed at the top personal income tax rate.
The SMSF Association has previously expressed concerns about the idea of a cap on superannuation balances, stating that large balances are a legacy issue following the introduction of the transfer balance cap which limits the amount that can be held in the tax-free retirement phase.
Mr Dunn agreed with the SMSF Association’s view that these problems will largely be resolved once the oldest generation has moved through the system.
“Once you get past the beneficiary being able to receive part of that money, these larger balances are all going to have to leave the superannuation system anyway,” he explained.
“There may be a group of boomers that benefit from it now, but by the time that money gets to me from my parents for example, that money is going to have to leave the system and the ability for me to get it back in is going to be subject to total super balance thresholds and like anyway. So we don’t want the government getting to trigger-happy. We want to see the [current] legislation take its course.”
