Skip to content

What's New

arrowAsset 1@3x

Business Planning Workshop Register now In this 90-minute workshop,…

Read More
arrowAsset 1@3x

Register Now Preview modal- Financial markets are moving and…

Read More
arrowAsset 1@3x

Article by Matt Sherwood, Head of Investment Strategy, Multi...

Read More

Upcoming Events

Cashflow Crunch-ed! Workshop

Cashflow Crunch-ed! Workshop: Where does the cash go, and how to find it in your business faster

Wed, 1 May 2024

SMSF Seminar - New rules, new strategies. What do I do?

Self-Managed Superannuation Seminar – New rules, new strategies. What do I do?

Wed, 29 May 2024

Sign up to b-Mail!

Want to hear the latest news as it happens? Simply fill out the form below and we'll send you regular updates so you can stay in the loop.

The $3M Superannuation Balance Tax – What does it mean? Posted on April 28, 2023

Superannuation balance tax

There would be very few people who haven’t heard about the governments proposed increase in tax on balances in superannuation in excess of $3m.  We delve a bit deeper to explain the proposed changes and what it will mean for those with superannuation balances which will be subject to the threshold and to who haven’t got there yet, but could.

As things currently stand, superannuation in accumulation phase is taxed at 15% on income whilst there is no tax on income supporting a complying pension.  The proposal is for income derived on that portion of the fund balance which exceeds $3m to have a further 15% tax applied to it.

The “income” for the purposes of the calculation is essentially the movement in the members’  balance in a financial year after adjusting for contributions and withdrawals.   This is a new definition of income as it includes unrealised movements in asset values, so is distinct from taxable income which doesn’t include gains on asset values in income until those assets are sold.  In years where there is a net negative revaluation the movement will be carried forward to be offset against future increases in balances.

The $3m will be based on a members Total Superannuation Balance, so for those with multiple superannuation accounts the balances are aggregated prior to the calculation being made.  As individual funds will not necessarily have access to members total balance information the calculations will be made by the ATO based on the information provided by the funds. 

Tax will be levied by the ATO to the individual member of the fund, not the fund itself.  The member will then have the option of paying the assessment themselves or passing it on to their fund for payment.  In the case of an individual with multiple funds, they can elect which fund they want the payment made from.

Whilst some assets, such as listed shares are easy to value, many funds are invested in assets where an exact valuation is difficult, if not impossible, to obtain.  The valuation of these assets, which is required to happen annually, will become far more controversial, as members over or nearing the $3m threshold will be wanting a low valuation to reduce the additional tax payable.  Also, as the tax calculation includes unrealised gains, there could be instances where there is insufficient cash available to be able to pay the assessment, resulting in the forced liquidation of some assets.  There are potentially further complications where the fund has a Limited Recourse Borrowing Arrangement (LBRA), however these are beyond the scope of this article.

One of the more unpopular aspects of this proposal is that the $3m is not indexed, and over time as superannuation balances go up, through higher levels of compulsory contributions and the general impact of inflation, an increasing number of individuals could be caught by the threshold.

Bear in mind this commences in the 2026 year, with the calculation of the movement in the balance being based on the differences in balances from 1 July 2025 to 30 June 2026. Some funds may not be required to lodge their 2026 return until 15 May 2027.  The assessments for 2026 would therefore not be likely to be issued until the 2028 financial year.  This sort of delay could present problems when a member dies and the benefits are paid out.  Executors may have to set aside an allowance in the estate to allow for delays in assessments being issued.

If you are concerned about the potential impact of this proposal, either as soon as it commences or as part of a longer term strategy, book a complimentary discovery with one of our Financial Advisers to discuss your options.

ac-logo-whiteArtboard 1@3x

Discover the difference that the right advice can make

Get in touch with our team today and learn how you and your business can grow to the next level. 

be better off.

talk to us Discover the difference that the right advice can make

Get in touch with our team today and learn how you and your business can grow to the next level. From structuring to sustainability, we'll help you reach your financial goals and live the lifestyle you deserve.

be better off.