We’ve compiled a brief breakdown of a few topical subjects from the recent Federal Budget that we thought you’d like to know.
1. $3m total Super Balance Tax
Whilst there wasn’t much new information following the consultation paper released on this back in March, it is the key proposed change for superannuation contained in this budget. The proposal is that from 1 July 2025, earnings on an individual’s total superannuation balance of more than $3m (not proposed to be indexed) will attract an additional 15% tax. Earnings will be calculated by the difference in an individual’s total superannuation balance between the start and end of the financial year, adjusted for contributions & withdrawals. Then, this is multiplied by the % of the total balance that is above $3m. Assessment and payment will be similar to the process some of you are familiar with for Division 293 tax (i.e., the ATO will calculate it and send a nice letter informing you of any additional tax payable). Any negative earnings can be carried forward indefinitely and offset future earnings. Regarding defined benefits, they have said a ‘commensurate treatment’ is intended to apply to these, however no guidance on how this will be calculated has been provided yet.From a planning perspective, superannuation continues to be a tax preferred environment even with this new tax being put into place, and a key strategy for clients with large super balances would be to try and even up balances between spouses to prevent one partner going above the $3m balance whilst the other is far below the threshold…
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