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!

 

[riskydave]

These governments or especially this one throw that much money around and away no wonder they looking to rip us off even more, my question would be does this affect them as well??

 

[trishy 42]

I thing it's a disgrace. Double dipping on money that has already been taxed à

 

[lizziexoxo]

0.5% of the population affected. While most of us have toiled all of our lives for a measly balance under $1 million. You have more you should pay more tax.

 

[Catherines]

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.

 

[TonyV]

Remember Labor are a mob of socialists, so they will be after our money because they think it's really their money. If this daylight robbery they are trying to foist upon us gets through parliament it will only be the first step. They are also proposing to tax unrealized capital gains in Super as well. Outrageous.

 

[TonyV]

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

 

[BruceC]

Why do you keep pushing this story?
It only effects a small proportion of retirees.
If I had $3m in super I wouldn’t give a damn…

 

[BonesBoats]

If this tax goes ahead it must be indexed ,also it must include all politicians of all colours ,the rules must be across the board ,protecting Polly’s is too common ,it’s time the general public understand that they are servants of the people not a protected species .

 

[anni63]

The average superannuation balance in Australia, as of June 30, 2022, for men was $182,667, while for women, it was $146,146. These figures exclude those with nil super balances, and the median balances were $66,159 for men and $52,075 for women. For those that dont know, the median is the middle so most of us are nowhere near 3 million.. So in effect this is scaring people who have no hope of having that balance.
This legislation is designed to stop the wealthy from putting their money into super to avoid paying taxes. Not to tax those of us who are not well off. It is closing a hole in tax law. It will discourage this loophole being used. Be sure those who have these balances also have accountants working out ways for them to avoid tax. I would like to know how many of the ney sayers actually have 3 million in super because that would tell us exactly who they are. The problem with the legislation is the lack of indexation. And that does need to be addressed.

 

[Cheezil]

Probably wont affect my meagre balance (but would affect my kids supers later on or if they inherit my super), but it stinks that all these changing goal posts/ rule changes are designed for govt to rob people to cover the excessive costly mistakes of so many government failures any which way they can!
How bout they get revenue by cutting out their own perks & excessive superannuations/retirement funds,etc- no the rules wont apply to themselves, of course!

 

[Giannidifirenze]

Can’t say the Labor Govt hasn’t got foresight… as wages go up $3M in a couple of generations time will be the norm. So better they introduce it at a time when less people are affected = less whingers.

 

[BruceC]

The average superannuation balance in Australia, as of June 30, 2022, for men was $182,667, while for women, it was $146,146. These figures exclude those with nil super balances, and the median balances were $66,159 for men and $52,075 for women. For those that dont know, the median is the middle so most of us are nowhere near 3 million.. So in effect this is scaring people who have no hope of having that balance.
This legislation is designed to stop the wealthy from putting their money into super to avoid paying taxes. Not to tax those of us who are not well off. It is closing a hole in tax law. It will discourage this loophole being used. Be sure those who have these balances also have accountants working out ways for them to avoid tax. I would like to know how many of the ney sayers actually have 3 million in super because that would tell us exactly who they are. The problem with the legislation is the lack of indexation. And that does need to be addressed.

At last someone with some common sense who can analyse a story and not be caught up in the hype and scaremongering of the SDC reports..
Well stated anni63.