The government has released draft legislation to introduce an additional earnings tax for superannuation balances over $3 million, with the measure unchanged from Labor’s original plans and leaving the super sector just 16 days to respond to the bills.
The draft Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 and draft Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023 were released on the Treasury website today.
The website stated the government was consulting on the two draft bills to enact changes to superannuation tax concessions announced in the 2023/24 budget and invited interested parties to make a submission during the consultation period, which closes on 18 October.
“The Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill reduces the tax concessions for individuals with a total superannuation balance (TSB) above $3 million by imposing an additional 15 per cent tax on certain earnings under a new Division 296 of the Income Tax Assessment Act 1997.”
“The bill also amends several acts to include provisions relating to the calculation of earnings, withdrawals and contributions, modifications for earnings of certain constitutionally protected interests, debt deferral provisions for defined benefit interests in the pre-end benefit phase and changes to the definition of TSB.”
The explanatory materials (EM) for the bills noted the TSB calculation was key to the operation of the bills and its application across the superannuation sector.
“The TSB concept is central to the scope of the Division 296 tax, which will be applied to the percentage of earnings corresponding to balances above $3 million,” the EM said.
“The earnings are calculated with reference to the difference in the TSB at the start and end of the income year, with adjustments for withdrawals and contributions.
“Schedule 2 of the bill amends the act to give effect to this measure that all Australian superannuation interests are counted in an individual’s TSB and introduces a new concept of TSB value.
“This [TSB] calculation method allows the same methodology to apply to interests in both Australian Prudential Regulation Authority-regulated funds and SMSFs.
“The formula also allows losses to be carried forward. It also ensures that individuals who drop below the threshold are able to have negative earnings recognised for future years (in the event that their balance grows again to exceed the threshold).”
In a joint statement, Treasurer Jim Chalmers and Financial Services Minister Stephen Jones said the change to superannuation tax concessions would “make the system fairer and more sustainable”.
“This modest adjustment to apply after the next election will affect only a handful of people,” Chalmers and Jones said.
“The 0.5 per cent of people with superannuation balances above $3 million will still receive tax breaks, just slightly less generous. The remaining 99.5 per cent of Australians with superannuation accounts are not affected at all.
“The amendments are consistent with the government’s proposed objective of superannuation, to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.”
