Written by Fabian Bussoletti, Technical Manager, SMSF Association
Following the Government’s release of the 2022-23 Tax Expenditures and Insights Statement, a media release issued by ministers Jim Chalmers and Stephen Jones on Tuesday heralded the pending arrival of the highly anticipated cap on high superannuation balances.
While there are only limited details from which we can work off at this early stage, initial fears of a ‘hard cap’ targeting certain SMSFs with high balances appear to have been alleviated. These initial concerns primarily revolved around the potential for a ‘hard cap’ to force the removal of superannuation balances above a certain limit – as this risked a raft of seemingly unnecessary complexity and disruption.
Fortunately, it appears that the main issue the Government seemed to be grappling with was not necessarily the presence of large balances in the super system, but rather the tax concessions that these balances attracted.
To that end, the approach announced by Government seems to more appropriately deal with this issue – without forcing the removal of superannuation benefits or restricting the amount that an individual is permitted to save through the superannuation system.
This proposed ‘soft cap’, is instead designed to specifically target the level of tax concessions enjoyed on earnings derived by fund members with a superannuation balance over $3 million.
That is, it’s a measure that is broadly designed to double the current rate of tax paid by superannuation funds on the earnings derived by fund assets above this level – from 1 July 2025.
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