The government has recently proposed a brand new tax for superannuation funds in Australia with a projected start date for the 2025/2026 financial year. Whilst this may be bad news for some, it is not bad news for everyone.

It is worth remembering that as of the date of this article, these changes are not yet law. What this means is that they may still change or not be implemented at all. The fact that there will be an election and potential change of government before the proposed start date is also something to consider.

The proposed amendments to the superannuation tax laws will be classified as Division 296. These laws will set out a new tax of 15% for those superannuation members who have a Total Superannuation Balance of over $3 million. Any member with a TSB of over $3 million at the end of the financial year, will pay 15% on the apportioned movement between the opening (with the bottom limit being $3 million) and closing balances of their TSB and applied against the fund’s superannuation earnings.

As such, this new tax will only affect individuals with more than $3 million in superannuation.

The calculation is actually quite complex and the definition of superannuation earnings is different to a normal calculation of taxable income. Most importantly, it includes unrealised movements on investments. Unrealised movements are not taxable items in the normal sense, and assets are only normally taxable when sold.

The extra tax, when calculated and assessed, will either be allowed to be released from the members balance in the superannuation fund, or be paid from a member’s personal funds.

This new tax will be an ongoing discussion item for the next few years so it is important to remember that things may change or not go ahead at all. Any planning should be done with this in mind and members should seek appropriate advice before rushing to change their funds investments.

If you have any questions in relation to this new tax, please contact Diana at The SMSF Accountant.