A retirement savings expert has acknowledged the Labor government’s proposed 30 per cent tax to be levied on superannuation balances above $3 million will change the appeal and nature of income streams.
Institute of Financial Professionals Australia head of superannuation Natasha Panagis noted amounts in the pension phase of an SMSF will also be counted toward determining if a member will be subject to the newly proposed tax.
“As we know currently earnings on balances in retirement-phase accounts are not taxed. But if this measure works on a person’s total super balance, [it] includes everything,” Panagis told attendees of a quarterly superannuation update today.
“This means if a person’s pension balance tips them over that $3 million limit, that will effectively be up for tax.
“So can you argue that a person’s pension will still technically be 100 per cent [tax] exempt if this proposal is legislated? I don’t think you can.”
According to Panagis, the additional administration processes associated with the implementation and management of the proposed change may well outweigh any perceived benefits of the policy, particularly if assessed over a longer timeframe.
“It’s going to get worse for those people [caught by the new laws] over time and for everyone over time, particularly due to the lack of [an] indexation [measure for] that $3 million threshold because it will end up capturing more people [in the future],” she suggested.
However, she did recognise one positive element included in the information sheet pertaining to the proposed policy.
“The only bit of good news, if I can say it is good news, is that super funds will not actually be required to calculate these earnings that are going to be attributed to a person with a balance of over $3 million,” she revealed.
“Rather it’s going to be the ATO that does this calculation.”
