Disclaimer: This article is general and does not constitute financial advice. Please consult a qualified financial adviser for advice tailored to your personal needs.

For seniors keeping an eye on the news lately, a major shake-up could be imminent to Australia’s superannuation system.

The looming change recently got many retirees and soon-to-be retirees feeling uneasy.

What does this really mean for seniors, and should everyone be worried?

The government’s proposed superannuation tax change could take effect from 1 July.

While it is still pending final legislation, it could have a significant impact on how nest eggs are taxed in retirement.

Under the current rules, earnings on your superannuation in the accumulation phase are taxed at 15 per cent.

However, the new proposal would double the tax rate to 30 per cent if a super balance exceeds $3 million.

The pending change came after Prime Minister Anthony Albanese's bid for a second term. Image Credit: Corporate Finance Institute

Financial adviser Josef Jindra summed up the mood among his clients.

‘They have played by the rules, made sacrifices, and now they’re facing a significant increase in tax on a portion of their hard-earned retirement savings,’ Jindra shared.

According to government estimates, about 80,000 Australians, or roughly 0.5% of the population, currently have super balances over $3 million.

The Association of Superannuation Funds of Australia (ASFA) also stated that the average super balance for men is $182,667, with a median of $66,159.

Meanwhile, women have an average superannuation balance of $146,146, with a median of $52,075.

For most Aussies, this tax change should not have any immediate impact.

However, the $3 million threshold should not be indexed to inflation.

As wages and super balances grow, more and more people could find themselves bumping up against that cap.

Modelling by AMP Capital’s deputy Chief Economist Diana Mousina suggested that a 22-year-old starting work today could retire with more than $3 million in super.

The cause of growth could be through wage increases and compound interest over time.

For seniors with a super balance approaching or exceeding $3 million, it’s time to be proactive.

Jindra shared some of his advice for Australians, especially seniors, who are worried about this change.

‘This may include planning withdrawal strategies to stay below the threshold, diversifying investment holdings outside of superannuation to enhance flexibility, and reducing exposure to the higher tax rate,’ Jindra advised.

‘Estate planning has also become increasingly important to ensure assets are structured in a tax-effective way for future beneficiaries.’

Self-managed super funds or SMSFs are also an option for those who want more control of their superannuation.

‘In the end, while the increase in the tax rate is a significant development that warrants attention, it’s not cause for alarm for most,’ Jindra concluded.

However, the looming change is a reminder to keep an eye on superannuation balances, review investment strategies, and consult a financial adviser for a more tailor-fit approach should these changes kick in.

Key Takeaways

• Tax rates on superannuation earnings will double from 15 per cent to 30 per cent for balances over $3 million starting 1 July, pending legislation.
• Financial adviser Josef Jindra acknowledged client concerns about the change but emphasised that the increased tax should only apply to the portion above the $3 million threshold.
• The average superannuation balance is well below $3 million, but critics warned that the unindexed cap means more people could be impacted in the future as balances grow.
• Those nearing or exceeding the $3 million threshold have been encouraged to be proactive and to seek strategies to manage the forthcoming super tax changes.

Are you worried about the new super tax changes? Do you think the $3 million cap is fair, or are you concerned about what it means for your retirement plans? Have you already made changes to your super strategy in response to the news? Share your thoughts and opinions about these changes in the comments section below!

 

[Ingot]

Tax is levied on what your superannuation earns (on your money), not on what has already been taxed. They invest your money & it earns interest - it is the INTEREST EARNED that is taxed, which is the same as us putting some money into a term deposit. That term deposit earns interest and the interest is taxed. Same as tax on normal wages.

I would love to have a super balance over a million, let alone 3 million!! Hopefully the ‘pollies’ money in super is also going to be taxed at the same proposed rate.

No.
It is exempt I heard.

 

[Ingot]

Naturally none of this applies politician's super. Funny that.

Orwellian.
The pigs from "Animal Farm" finally exposed.

 

[Ingot]

That's Albo....

Ha ha!
Is that the Albo who has been sucking on the public tit all his life?
* Social Housing
*Free Uni education in the post-Whitlam era
* Walked into a cushy Labor position in the Hawke govt based on his leading the Uni Marxist youth
* Cried "underprivilege" like a stuck pig leading up to the 2022 election, until polling showed the public had just about enough of his crying poor
* Recently purchased a $4.3 million waterfront home
Yes ... this Albo.
Where does a boy from such impoverished circumstances get $4.3 million?
The public purse?
(Rhetorical - no need to reply)

 

[anni63]

Is there a safeguard in place to prevent future governments from deciding that people with superannuation less than $3 mil or less than say ... $500k ... will eventually be included in this tax?

Interesting that Socialist governments always go broke, with nothing to show for their huge spending habits.
Then they go looking for something new to tax, to feed their spendthrift habits.

Of course no one could ever accuse the Albanese government of being shocking economic managers, or that they don't look after pensioners, or balance their budgets.
But maybe one or two people might be tempted to think that way.

Leftist governments never have enough money to spend, so they become kleptocracies.
Luckily we don't have anything of the sort in Australia ... do we?

This is the most ill informed comment I have almost ever read. And one that most economists would take to task. Socialist governments do not go broke with nothing to show for it. During the Howard years the surplus which was created by the mining boom was basically not used for anything that benefitted this country. They sat on their hands and did nothing to forward the countries infrastructure or safeguard its future, except give tax breaks to the rich and property investors hence our housing crisis today. and as always when what you allude to as socialist governments come in there is years of neglect to infrastucture and development to catch up on. And yet they still manage to support the community to some extent. During the GFC Wayne Swan a Labor treasurer was named the worlds best treasurer judged by leading European banking and finance magazine, becoming only the second Australian treasurer after Paul Keating to claim the prize. And Keating has most often been acclaimed as the best treasurer this country has seen. The "not enough money" mantra that is so often wheeled out due to the prominence of economic rationalist ideology is now hotly disputed amongst economists in different camps. But on one statement I can agree we do not have a socialist government and are unlikely to ever have in this country. Tberefore, your statements are basically untested in this environment.

 

[anni63]

Ha ha!
Is that the Albo who has been sucking on the public tit all his life?
* Social Housing
*Free Uni education in the post-Whitlam era
* Walked into a cushy Labor position in the Hawke govt based on his leading the Uni Marxist youth
* Cried "underprivilege" like a stuck pig leading up to the 2022 election, until polling showed the public had just about enough of his crying poor
* Recently purchased a $4.3 million waterfront home
Yes ... this Albo.
Where does a boy from such impoverished circumstances get $4.3 million?
The public purse?
(Rhetorical - no need to reply)

So anyone from an impoverished background has no right to become affluent in this country and if they do it must be by suspicious means. Is that what you are saying? Long live the class system right? and may none of those low life plebs ever become upwardly mobile. And You clearly don't want a caring society that takes care of those less fortunate, making sure there is no way in the world the lower classes can crawl out of the gutter. Bring back the exploitation of the industrial revolution , right? By the way statistically in this country the biggest government tit sucklers are business, mostly through tax breaks and concessions.

 

[BruceC]

When I retired from my work environment, my super was not through any of the super companies, but in specialist constructed way where its not relient on the "Whims" of any stock markets.

My super was through state government agreeance how it was set up. Contributions which came out of my pay went strait back to the state government.

I loved "High" inflation times as every October my pension was adjusted to the CPI & rose quite substantially with the inflation having a flow on effect to the CPI.

I still get the adjustments every October, but with any reduction with inflation has the same effect with the CPI where it carries onto my super payments.

The best part is, where I have enjoyed so far, 27 years of retirement. Hopefully, mission impossible, 20 more forthcoming. I'm totally enjoying every day, rain, hail or shine to whatever the day yields.

I was retired early through injuries sustained, which were, thankfully, classified as work related.

Crawling along to the end of the perch is getting closer each day.

Keep well one & all.

So I guess you worked for the government?