Superannuation, Tax

New 30 per cent tax not accurate

30 per cent tax

Practitioners and SMSF trustees alike should not be under the impression the proposed new superannuation tax is just a 30 per cent impost.

An SMSF education leader has suggested the magnitude of proposed additional tax on total super balances above $3 million has been misrepresented and should not be used at face value to assess whether to hold assets within the retirement savings system.

“Even the ATO is referring to it as the new 30 per cent tax on super, but it’s not a 30 per cent tax. Why is it not a 30 per cent tax? Because one component is a 15 per cent tax on taxable income calculated in accordance with the Income Tax Assessment Act and the other 15 per cent tax is calculated on a base which is using an arbitrary formula,” Accurium head of education Mark Ellem told delegates at the recent SMSF Professionals Day 2023 co-hosted by selfmanagedsuper and the actuarial firm.

“It means the total amount of tax paid by an individual could be less or it could be a lot more than 30 per cent of taxable income.”

To this end, Ellem warned advisers not to think of the proposed measure as a 30 per cent tax and not to assess it as a preferable alternative to the highest marginal tax rate of 45 per cent.

“The way the formula works is with the extra 15 per cent tax calculated on that earnings base means a fund member could end up paying way more than 45 per cent,” he noted.

Aside from the flaws highlighted, he pointed out the new policy is unnecessary.

“The previous curtailing of the contributions caps, compulsory cashing requirement upon death, will mean these large member balances will disappear over time and are unlikely to ever occur again,” he said.

“And the use of an arbitrary formula to determine an earnings base upon which tax is levied will always result in winners and losers. It’s not fair and it’s not equitable.”

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