In a very quick turnaround from announcement to draft legislation, Treasury has released the exposure draft legislation for consultation to enact the Government’s intention to impose a 30% tax on future superannuation fund earnings where the member’s total superannuation balance is above $3m.

The draft legislation confirms the Government’s intention to:

  • Impose the tax on member accounts with superannuation balances above $3 million from 1 July 2025 (not indexed); and
  • Apply the additional 15% tax to ‘unrealised gains’. This will mean that a tax liability will arise if the value of the assets goes up

Currently, all fund income is taxed at either 15%, or 10% for capital assets that have been held by the fund for more than 12 months. Unrealised gains, that is gains that are made because of changes in value (ie gains on paper), are not currently taxed – only when the gain is realised on sale or disposal of the asset.

If enacted, the legislation would mean that those impacted, could be paying tax on gains in value but without the cash from a sale to support the tax payment.

Understandably these proposed changes are causing concern in the SMSF industry, and by clients alike.  However, it is important to note that these are only ‘proposed changes’ at this stage – and incomplete proposals at that. There is a lot that needs fleshing out to make these proposals even remotely workable.

Industry experts have raised some issues with the proposals and will continue to do so during the government consultation period.  It is entirely possible that the Bill will differ considerably to what is currently on the table.

It is also important to note that any changes in this space:

  • won’t be until the 2027 financial year – so we have some time to digest, and prepare
  • will only affect members who have a total super balance over $3m.

And there will be a federal election in the meantime, so there may be an alternative offered by the opposition that is more appealing to the voting public – and therefore not get off the ground at all.

In the meantime there are strategies that you might be able to look at to reduce any potential impacts of the tax – such as equalisation of member accounts.  This is more accessible now that the work test for those under 75 has been abolished, and members are able to use bring-forward provisions up to age 75 (subject to total member balance provisions and unused cap limits).

If you want to know more, please don’t hesitate to contact the SMSF team – we’re here to help.