Speaking in a recent SMSF Adviser Show podcast, Smarter SMSF chief executive Aaron Dunn said while the October budget had minimal changes impacting the superannuation sector, be expects the upcoming federal budget in May 2023 will be more significant.
While the budget in October was silent on the stage three tax cuts, Mr Dunn said there has been a lot of discussion around whether they will or won’t proceed with the tax cuts.
“What we will likely see if they do proceed with these tax cuts is a reduction on the other side. Could we see a reduction perhaps in the Division 293 threshold?” he questioned.
“So whilst they’re giving money one way through the tax cuts, will they actually claw it back through an additional tax through division 293?”
Mr Dunn said we could see the government look to lower the threshold for the Division 293 tax down to $200,000 from the current $250,000 or could even drop it down to the top marginal rate at $180,000.
“I think we might see some connection there if they do decide to proceed with these stage three tax cuts.”
In its pre-budget submission, superannuation industry association ASFA called for the Division 293 threshold to be linked with the top personal income tax rate plus an additional amount to account for compulsory superannuation contributions.
For the financial year 2023–24, ASFA proposed making the threshold for the Division 293 tax be $200,000.
“That is the threshold for the top personal tax rate of $180,000 with a further $20,000 allowance for compulsory superannuation contributions,” the submission stated.
“In later years the threshold for the Division 293 could be adjusted in line with any changes to the threshold for the top personal tax rate and for changes in the rate of compulsory superannuation. For example, the threshold for the top personal rate is legislated to increase to $200,000 from 1 July 2024.”
ASFA estimated that around $700 million a year could be raised in additional Division 293 tax if the threshold was lowered in this way.
This figure differs from estimates provided by the FSC which estimated the measure would raise $620 million per year.
