An SMSF specialist has recognised the new formula to be used to determine an individual’s total super balance as set out in the proposed bill legislating the $3 million soft cap will have implications for members that are completely unrelated to the new 15 per cent tax.
Speaking at The Tax Institute National Superannuation Conference held recently in Melbourne, Colonial First State head of technical services Craig Day noted: “[From 30 June 2025 we will have] a new calculation for [a person’s] total super balance. [This is] because when we are looking at defined benefit interests, we’re currently looking at the transfer balance account value for them and that will lead to distortions and some inequitable outcomes if we left total super balance being calculated that way.
“The interesting thing there is that those changes could impact clients [whose total super balance] is nowhere near $3 million [and] I’m not saying they may have to pay this tax all of a sudden.”
Instead, Day pointed out the new calculation method defined in the final legislation for the measure could result in lower total super balances than those currently being witnessed and this has the potential to have ramifications for other unrelated SMSF strategies.
“So you might have a client who might be sitting on [a total super balance] of $2 million and therefore can’t make any non-concessional contributions. If their total super balance falls, to let’s say $1.5 million because of this recalculation, all of a sudden their ability to make non-concessional contributions is turned back on subject to age limits,” he noted.
“Also, other clients who may be sitting at $800,000 or $900,000 and all of a sudden their [total super balance] value drops to below $500,000, [it will give them] the ability to make catch-up concessional contributions.
“So these rules will actually have knock-on implications for not only your very high balance clients, but for certain other clients as well.”
