Hey @feteguru just keep in mind the tax is not necessarily zero if your TSB is <$3M. There is already a 15% tax on any taxable income earned on Super that is still in Accumulation phase, i.e. taxable income earned on any super funds that are above the transfer cap or not earned by the growth of those funds that had been transferred to pension phase under the transfer cap (soon to be $2M).

Personally I don't think this article is particularly helpful as it overlooks some key issues.

You're definitely correct, as are Heffron, in suggesting you would still be most likely better off with the funds in Super and to pay the proportional tax on taxable income >$3M.

But as others have stated, more homework required by each investor and maybe bounce any strategy off your accountant well in advance of decisive action on excess funds or assets.

I usually find Meg Heffron articles worthwhile reading for anyone with an SMSF. However this article is from Oct 2023 and while the substance of the article is correct, a lot has changed from the perspective that this tax will be more complex than first thought. For example, the double taxation possibility whereby gains may end up being paid at 40% which would be much worse than company tax at 30% or even the highest personal tax rate of 23.5% (assuming CGT discount of 50%). I'm sure Heffron will have an updated article in relation to this so will watch out for it.

Here's a good take (IMHO) from Morningstar:

https://www.morningstar.com.au/retirement/unconventional-wisdom-state-retirement-midst-super-tax-fight?user_segment=indinv&utm_source=eloqua&utm_medium=email&utm_campaign=ind_apac_au_en_2505_tf_n_n_morningnote&utm_content=morningnotefree_64015&utm_id=33114

I previously voiced concern that the 30% tax on balances over $3m will also result in another 10% tax when assets are sold (if asset held for over 1 year, otherwise 15%) so a total of 40% tax on a percentage of some funds. Now I hear that franking credit refunds is included in the assessable income for the 30% tax so it will result in a tax on a refund. Now that would just be ridiculous!

More details in the article online (https://www.skynews.com.au/australia-news/politics/former-state-premiers-and-politicians-under-previous-pension-scheme-will-be-exempted-from-labors-superannuation-tax/news-story/666cc496e1e66d0403e6de5f6804e9c8):

> This is because it is a constitutional requirement to make certain individuals exempt from the tax, such as some former state office holders.

I'm not familiar with this exemption but it sounds like a general tax exemption is already in place for those office holders rather than being intended specifically for this new tax.

I didn'tt think about the double taxation. I'm still quite a few years away from being able to do anything so if my super somehow miraculously exceeds $3m in the near future I will just have to accept it.

Below is excerpt from the AFR.

"Peter Crump, a senior consultant in the private wealth division at accounting firm BDO, said that under the proposed policy, people would pay a total tax on unrealised and realised capital gains of 25 per cent.

This includes the 15 per cent on unrealised gains, plus the existing discounted 10 per cent capital gains rate for assets held inside super for more than 12 months.

It is slightly higher than the current maximum 23.5 per cent rate on capital gains for high-income earners for assets held outside super for more than one year. (Income such as dividends and rent would face a total rate of up to 30 per cent for the portion of earnings derived from super balances above $3 million.)"

If I was able to access my super and had a $3m plus balance I'm not sure what I would do. I actually think it may be fortunate that I can't do anything brcause if this passes the Senate, my prediction is that it will ultimately be reversed but for those that have already withdrawn their funds, I assume they won't be able to put those finds back in to their super fund.

This is mainly an issue for people with their SMSF mainly consisting of things like the family farm, or big business premises. The assets aren't liquid, the actual cash earnings are often seasonal and unreliable, and the government, State in particular, can arbitrarily jack up the valuations as they keep doing every year with residential property valuations. This is leaving aside the fundamental issue with taxing any unrealised gain.

For the average Super holder sure, it's not a particularly big deal, particularly if you focus on fully franked shares, the 30% is taxed already. $23k might not be a big burden, but it's still money that individual has worked for / earned. I for one don't think the government is doing a great job with the taxation they're getting already so I'm loath to give them any additional of my hard earned.

The devil is in the detail. What is the audit process for big (Union run, Labor donating) industry super funds with all their 'unlisted' assets? Also, it won't hit the ridiculously high 'defined benefit' superannuation of politicians, judges and the like. To get the $400k plus p/a pensions of some of those individuals you'd need well over a $3million balance.

It's just bad policy, and it's going to set a dangerous precedent.

Just for the record I don't have over $3million in my SMSF (yet ;D ).

@BigStrawbs70 thanks for posting that link. Very interesting reading the examples.

What surprised me was that you cannot avoid the tax by making withdrawals to keep your balance below the $3M amount. Any withdrawal amounts get added back into the total balance calculation at the end of the financial year for the purpose of calculating the tax liability.

By my understanding of the info online, that is correct @Byrnesty, at least in that year that you are doing the assessment. i.e. The purpose is to capture the growth of the fund, so withdrawals are added back in, and contributions are removed for the purposes of the calculation.

In regard to your post about 30% tax @BigStrawbs70 really only being 0.5% in one case and lesser in the other example, you may be missing that the existing 15% tax is still applicable for any taxable income for in the fund that is still in accumulation phase. Currently the cap for total contributions into pension phase being $1.9M rising to $2M next FY. Of course, that can grow to an infinite amount once rolled into pension phase and still have no tax applicable, but anything still in accumulation phase (so anything that was not originally put into pension phase under the cap {BTW my cap was $1.6M when I went to pension phase} remains in accumulation phase and pays 15% tax on any net taxable income.

As I and many others are pointing out (including @tomsmithidg), the biggest issue/s is not the fact that taxation on profits over $3M in TSB is bad, but that it is to be applied on unrealised gains annually and no indexing is currently applied.

@Byrnesty My understanding is that you have to withdraw your funds prior to 30th June 2026 if you want to keep it below $3m as the starting point is 1st July 2025 and the end point is 30th June 2026 to calculate the increase in earnings/gains. I'm not 100% sure though and it won't affect me at this stage but it will mean I have to keep a close eye on the value of my super close to the end of every financial year in case I fluke an incredible windfall from one of my specs :)

If this is true I'm guessing it won't proceed in the current form - from the australian:

Treasurer Jim Chalmers’ tax grab on the wealthiest Australians inside the super system will end up hitting millions of young workers inside the nation’s biggest industry funds.

Young workers, with modest super balances are set to be swept up in the changes that are targeted at super members with balances in excess of $3m.

About 60 per cent of younger workers default into big funds. And though they will have balances well under $3m they are still going to be hit with the same tax level of tax enjoyed by wealthy older members who have accumulated large sums over a lifetime.

“Ironically, lower balance members could be penalised by a tax that was only supposed to affect the wealthy,” says Chris Brycki, who runs the $1 billion Stockspot group.

Brycki explains this twist on the tax will occur because industry funds pool money with all investors taxed in the same way.

“This is all because it’s too complex for the big funds to calculate tax at an individual level,” Brycki says.

To play devils advocate here. what if the tax in unrealised gains has a positive benefit for small caps. A SMSF could invest in a volatile small cap when they otherwise wouldn't because if the price halves, they could get a tax benefit without any capital loss (unless they sell). So the pain we feel as small cap investors, when we buy a stock, watch it plummet and sit on a loss for ages, might have a secondary benefit.