The Government is consulting on draft legislation which has been released regarding proposed changes to superannuation tax concessions announced in the 2023-24 Federal Budget.
This draft legislation is intended to reduce the tax concessions available to individuals with total superannuation balances (‘TSBs’) exceeding $3 million. Assuming this draft legislation becomes law, from the 2026 income year onwards, the headline concessional tax rates applying to superannuation earnings will be:
– up to 15% on earnings on superannuation balances below $3 million; and
– up to an overall 30% on a percentage of earnings equal to the percentage of superannuation balances above $3 million.
The draft legislation reduces the tax concessions by imposing a new tax of 15% on certain “earnings” based on the percentage of the TSB exceeding the $3 million threshold. The tax is imposed directly on the individual and is separate from the tax arrangements of the superannuation fund.
Negative superannuation earnings from balances above $3 million will be carried forward and used to reduce the amount of superannuation earnings subject to the proposed new tax in future income years.
The draft legislation also amends existing legislation to include provisions relating to the calculation of earnings, withdrawals and contributions, and changes to the definition of TSB.
The above measures are not yet law and are subject to the passage of the draft legislation.