The Albanese Government announced on 28 February 2023 that it proposes to make Australia’s superannuation system ‘more sustainable and fairer with one modest change that affects less than 0.5 per cent of all Australians’.
Currently, earnings from superannuation in the accumulation phase are taxed at a concessional rate of up to 15 per cent. This will continue for all superannuation accounts with balances below $3 million.
From 1 July 2025 financial year, the concessional tax rate applied to future earnings for balances above $3 million will be increased to 30 per cent.
This is expected to apply to around 80,000 people, and they will continue to benefit from the lower tax rate on earnings from the $3 million below the threshold. The changes are expected to bring the government an extra $2 billion in tax revenue a year.
This adjustment does not impose a limit on the size of superannuation account balances in the accumulation phase. And it applies to future earnings – it is not retrospective.
Superannuation earnings on funds with a balance of up to $1.7 million are tax-free in the retirement phase, and this will remain unchanged.
The Government will introduce the super tax reforms in the upcoming May budget and introduce enabling legislation to implement this adjustment as soon as practicable. The Government has advised that further consultation will be undertaken with the superannuation industry and other relevant stakeholders to settle the implementation of the measure.
The Prime Minister reiterated that the changes would not be implemented in this term of Parliament in an attempt to distance the government from accusations of a broken election promise.
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