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Missing areas in details for proposed threshold

By miranda-brownlee-momentummedia-com-au
March 07 2023
1 minute read
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The government’s fact sheet on the $3 million threshold is silent on how the measure will apply in a range of areas including reversionary pensions and insurance proceeds.

While the government last week released details on how the earnings tax calculation will operate for the proposed $3 million measure, there is still uncertainty around how it will apply to things like family law splits, reversionary pensions and insurance proceeds.

The fact sheet explains that earnings will be calculated based on an individual’s total super balance, including all notional gains and losses.


In a recent article, Smarter SMSF chief executive Aaron Dunn noted that there are numerous areas of the existing super laws that influence a member’s total super balance that haven’t been discussed in this initial fact sheet that will play an important role in how the tax will apply.

“Consider things like family law splits, reversionary pensions, insurance proceeds, just to name a few,” said Mr Dunn.

Heffron managing director Meg Heffron similarly pointed out that where a member inherits a pension, this could result in a significant change in their balance and push them above the $3 million threshold.

Ms Heffron gave an example of a member with a $2 million super balance at 30 June 2025.

During the year, the member’s wife dies and he inherits her $2 million pension, she explained. He decides to keep the pension running and leave the money in super.

“During the year his balance increases with earnings, he takes some pension payments and at the end of the year he has a total of $4.2m in super.

All of a sudden someone who never expected to be included in this measure will be,” Ms Heffron cautioned.

Ms Heffron said she hopes that the government’s formula will be sophisticated enough to adjust for the fact that the member’s $2 million inheritance should be treated as a contribution.

“Otherwise it would be included in his earnings and subject to the special extra tax,” she warned.

Speaking at the recent SMSF Association National Conference, SMSF Association head of policy and advocacy Tracey Scotchbrook said it is crucial that any soft cap on balances proposed by the government excludes insurance proceeds.

“Something that hasn’t been talked about is how many funds with large balances that they’ve quoted in the statistics include these sorts of amounts of money,”  she stated.

“It’s really important that we have these people excluded. We’ve got the measure there in terms of the transfer balance cap and total super balance so we need to make sure they’re protected here as well.” 


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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