Super Tax for Wealthy

In my last two videos and articles I spoke about the changes Labor has introduced or is planning to introduce with their October Budget 2022. If you missed those, please check them out, as they really introduce the landscape of our superannuation and retirement system in Australia: Federal Budget October 2022 and Selling home, Age Pension and Federal Budget 2022-23

What I want to talk about today is not part of the budget, but I am sure that if Labor had it their way, they would have included those recommendations as well, but they need to wait until those recommended measures in relation to superannuation have been put into legislation first.

Financial Services Minister Stephen Jones already said that Labor is planning to address tax concessions that superannuation system provides for all wealthy families. So, are you curious?

Labor plans to deal with wealthy families and how superannuation is a way they legally reduce the tax, but that was not the original intention of the government at all, when the super system was established many years ago.

To give you a bit of an explanation, according to today’s rules, if you commence a retirement income stream today, you can only transfer from super to a pension fund up to the Transfer Balance Cap (TBC). If you commenced your income stream after 1st July 2021, your TBC cap is $1.7mil.

I won’t be explaining rules of Transfer balance Cap today, but the point I am trying to make is, that there is a limit as to how much can be invested in an income stream, but there is no limit how much we can have in a superannuation account.

I could not find any statistics that would actually confirm how many SMSF there are with assets value above $5mil, however the minister said that there are 32 self-managed super funds with more than $100mil in assets, and the largest with over $400mil.

What the government is saying is that superannuation system was designed for people as a way to save for their retirement, and the tax concession was introduced as a way to encourage everyday Australians to build their nest-egg for their own future.

However, the minister believes that it was not intention of the superannuation system to create a tax heaven for the riches, who hide their savings within the superannuation paying only 15% tax, rather than pay the tax at Marginal Tax Rate at 45%. And that is a huge tax loss for the government and the nation.

Mercer, which is one of the biggest corporate super funds, found that the tax concession on a single $10mil SMSF could support 3.1 full Age Pensions every year and combining all those SMSF funds of $10mil plus balances, their tax concessions could fund full Age Pension for more than 240,000 pensioners every single year.

Looking at those figures, Labor government wants to remove tax concessions for all SMSFs with assets above $5mil

I don’t believe this will be an easy task for Labor to win this argument, however it is obvious that the intention is very serious and very real.

So now, I would like to hear from you, what is your opinion about the idea to remove the concessional tax for those big self-managed super funds with assets of $5mil and more.

And please be fair and don’t forget that all the corporate and industry super funds that are supporting this idea, don’t really do this for your sake, and for the benefit of everyday Australian. This is purely self-interest to build their own assets and grow as a fund and make more profile for their own super fund, but by the same taken, this rises a question of tax fairness in Australia as well.

So now, I am curious, would you support this proposal? Please let me know.

YES means that you would support the recommendations to remove tax concessions for those big SMSFs, as this is too much of tax avoidance by the wealthy.

Or NO meaning that superannuation rules were introduced equally for all, the fact that someone managed to save more, should not limit the rules. We are all the same and the same rules should apply to everyone.

You can easily reply to hello@aboutretirement.com.au

By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement