Pittwater Life April 2023 Issue

know how much you have in
super, in total, are you, your
accountant (via the ATO portal)
and the ATO. Your superfund
doesn’t know if you have
another fund. For the Government
to tax those with over $3
million in super it must have
access to consolidated data, in
this case from the ATO. (You
can find your TSB via MyGov
and the ATO links in there.)
This new tax proposes
to tax ‘earnings’ which are
defined as your TSB at the
end of the financial year less
your TSB at the end of the
previous financial year plus
your withdrawals less your net
contributions. The proportion
of earnings that are taxable
is that proportion of your account
over $3 million and the
tax on that is 15%.
This is not how we have
traditionally approached
taxation within super, or, in
general. The main concern is
that changes to capital values
are now subject to being
taxed – not sold items but
items that have simply gone
up in value. As well, capital
gains tax concessions normally
available inside super are also
disregarded. Consider if your
fund invested in a volatile asset
– bitcoin, tech shares or even
property that has risen in value
one year and fallen in value in
the next and being taxed in
these circumstances under this
proposal which contains no
provision for refunds.
If you want a more detailed
look at this issue beyond the
limited space I have here I’d
suggest you Google Graham
Hand’s very good article on
Firstlinks from 8 March. In it
he considers 10 revelations
about the new tax.
On of the issues examined
by Hand in the article was
modelling from the Financial
Services Council (FSC) attacking
the Government’s position
on not indexing the $3 million
cap. The FSC notes that by not
indexing the threshold some
500,000 taxpayers will breach
it in their lifetimes; leaving
the amount at $3 million
means that in today’s dollars
a 30-year-old will have a real
cap of $1 million in super,
calling into question the intergenerational
fairness of not
indexing.
The FSC also pointed out
that given the start date of the
The Local Voice Since 1991
legislation being 1 July 2025
and the first measurement
date being 30 June 2026 –
three years from now, the real
threshold is nearer to $2.5
million in today’s dollars not
$3 million after allowing for
current rates of inflation.
While the proposal is directed
at individual member
accounts over $3 million, there
are quite a few funds that total
$3 million (or $2.5 million if
you take the FSC’s point about
indexing), mostly mums and
dads, who could find themselves
affected by the proposal
on the death of a partner.
So what planning steps can
be taken now in anticipation
of the legislation?
The most obvious is to work
towards equalising balances
between spouses where material
differences exist and one
spouse is caught and the other
isn’t. A recontribution strategy
is likely the most effective
pathway but the Hand article
went so far as to suggest
some may choose super splitting
via divorce although it is
likely this would be caught under
anti-avoidance provisions
of the tax legislation.
Investment bonds have been
suggested for some time as
an alternative to superannuation,
earnings within these are
taxed at the company rate
while maintained and the proceeds
tax free after 10 years.
People likely to be affected
by the rule changes will start
to reassess their choice of
holding vehicle – super versus
trust versus company. The
issue comes down to the final
tax rate, in super you may be
taxed at up to 30%, however,
company profits and trust
distributions can be made to
those on lower rates of tax.
Brian Hrnjak B Bus CPA (FPS) is
a Director of GHR Accounting
Group Pty Ltd, Certified
Practising Accountants. Offices
at: Suite 12, Ground Floor,
20 Bungan Street Mona Vale
NSW 2103 and Shop 8, 9 – 15
Central Ave Manly NSW 2095,
Telephone: 02 9979-4300,
Webs: www.ghr.com.au and
www.altre.com.au Email:
brian@ghr.com.au
These comments are of a
general nature only and are
not intended as a substitute
for professional advice.
APRIL 2023 57
Business Life