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Details of tax calculation for $3m threshold a ‘mixed blessing’

By miranda-brownlee-momentummedia-com-au
March 02 2023
1 minute read
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The proposed tax on earnings calculation for balances exceeding $3 million will see some members paying tax on unrealised earnings, says the SMSF Association.

Treasury released a Fact Sheet on Wednesday (1 March) explaining the details of how tax on earnings will be calculated.

SMSF Association chief executive Peter Burgess said the good news about the fact sheet is that it means super funds, including SMSFs, will not be required to calculate the earnings attributable to the member’s balance above $3 million.


“The ATO will use a prescribed formula to calculate the proportion of total earnings which will be subject to additional 15% tax,” explained Mr Burgess.

“Negative earnings can be carried forward and offset against this tax in future year’s tax liabilities,” he said.

However, on the debit side, the ATO will be using an individual’s total super balance to calculate their earnings, which means it will include all notional (unrealised) gains and losses.

“This essentially means some members will be paying tax on unrealised earnings which is highly unusual,” he said.

Mr Burgess said the Association’s preferred approach would have been for the ATO to do a calculation of ‘notional earnings’ using a similar approach to the existing excess contributions tax regime.

The fact sheet states that the ATO will use a set formula to calculate the earnings based on the information it receives from each super fund every year.

This formula will calculate the difference between the member’s total super balance for the current and previous financial year and adjust for net contributions (excluding contributions tax paid by the fund on behalf of the member) and withdrawals, it said.

The ATO already uses super fund reporting to calculate the total amount that individuals have in the super system.


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Miranda Brownlee

Miranda Brownlee

Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda on: miranda.brownlee@momentummedia.com.au