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Impact of Australia’s New Superannuation Tax Changes: Key Insights
Recent analysis by the Australian National University (ANU) has identified the households most likely to be affected by the federal government’s proposed increase in superannuation tax. This proposal involves raising the tax rate on earnings from 15% to 30% for individuals with super balances exceeding $3 million. Such a significant policy change has ignited controversy, particularly due to its application to unrealised capital gains and the non-indexed threshold.
Who Will Be Affected?
The analysis reveals that the households impacted by this change largely comprise high-income earners, including doctors, engineers, farmers, CEOs, and senior managers. On average, these individuals earn approximately three times more than the general population. The median superannuation balance among those affected is around $5.9 million, coupled with an external median wealth of $3.2 million. This contrasts sharply with the average national super balance of $387,000, with a median of just $143,000.
Furthermore, a demographic breakdown shows that two-thirds of the estimated 87,000 high super balance holders are men over 65 years of age. Interestingly, while a significant portion resides in capital cities, a majority (54%) do not currently participate in the workforce.
Financial Capability to Absorb the Tax
The ANU analysis indicates that only 500 individuals, representing 0.6% of those with large super balances, may face challenges in covering the additional tax burden. Associate Professor Ben Phillips from ANU stated that stress tests show that most households with high superannuation could manage the proposed tax increases without excessive strain. For instance, a person with a super balance of $4 million experiencing a 10% increase, leading to a balance of $4.4 million, would incur an additional tax liability of around $19,019.
However, households most vulnerable to the new tax are those that hold significant illiquid assets. For instance, individuals with substantial investments in family farms, often within Self-Managed Superannuation Funds (SMSFs), may struggle to meet tax obligations without other sources of income.
Conclusion
While the proposed superannuation tax change has created a stir, the majority of high-balance households are likely to absorb the new tax burdens relatively easily. The policy, first introduced in late 2023 and set to commence on July 1, 2025, remains unlegislated.
This research does not delve into the policy’s broader implications. Still, it serves to underscore that for most affluent Australians with substantial superannuation balances, the financial impact of the proposed tax adjustments is expected to be manageable.
For further information and insights into this evolving story, interested readers can look for updates from reliable sources such as Yahoo Finance Australia on platforms including Facebook, LinkedIn, and Instagram.
