What Changes to Superannuation Tax Rates Could Mean For You

If you’re like most Australians, your retirement plans depend on money tied up in real estate and superannuation. So that makes it particularly worrying when the government begins to suggest possible changes on how to tax your superannuation in the future.

Money Morning‘s editor in chief Kris Sayce has been tracking how the government plans to take more of your super, and what it means for your wealth. One of their ideas for changing superannuation is by scrapping tax concessions on high income earners.

For now the government wants to cut tax concessions on superannuation for anyone earning over AU$300,000. Currently if you earn more than AU$300,000 a year, you pay 30% in tax on your super contributions. That means that if you contribute AU$28,500 in a single year (at a standard rate of 9.5% of your salary), AU$8,550 of that figure goes to paying tax on your super contributions.

Changes to the superannuation tax affects anyone who owns an asset

The truth is that anyone who owns an asset, regardless of their income, could be at risk of higher taxes. This is because selling assets acts as a form of income.

If you have an investment portfolio, be it in real estate or stocks — or both — you may have plans for cashing in on them in the future. Any sale of your assets will leave you a whole lot more cash rich.

If you sell a house for $500,000, it would count as part of your overall income for the year in which you sold it. And that would qualify you as a high income earner. It would also make you liable to pay 30% tax on your super contribution for that year.

If those taxes were to rise to 50% (and the figures remain unknown for now) for example, you could be paying up to half of your super contribution in taxes for the year in which you sold an asset. That could mean paying up to AU$14,250 in taxes on your super.

And that’s only for people who plan to sell assets but don’t normally cross the AU$300,000 high income threshold. If you qualify as a high income earner every year, that’s a significant hit on your superannuation in the long run. Over the course of 30 years, that amounts to AU$427,500 in superannuation taxes.

Support for cutting super tax concessions among voters is high

In a recent poll that asked voters whether they would support removing superannuation tax concessions for high earners, 55% said they would, while only 25% opposed it. That includes 66% of people over the age of 55 who support cutting the tax concessions for high income earners.

Voters seem to be supportive of the idea, and the media is getting right behind them too. That means that the conversation over super tax concessions will take place sooner rather than later. While high income earners are likely to feel its initial impact, the government’s designs will punish anyone who owns assets.

Mat Spasic
Contributor, Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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