Less than 1% of wealthy families will struggle to pay super tax: study

There needs to be a more holistic approach to taxing “wealthy” individuals who may use super as a tax effective means to transfer wealth to the next generation. Little has been said about “wealthy” individuals with modest superannuation balances but living in $3m+ properties and drawing full pensions. Surely this needs to be part of the discussion.
Perhaps a threshold (indexed) on property value and then reduction in pension for those over supported by a reverse mortgage so they are not required to sell the home or lose income.
Without a holistic tax review, many facing the Div 296 tax will withdraw super funds and update the family residence or seek out other forms of tax effective investment to side step the tax.
The Govt is unlikely to go there as it would be massively unpopular with voters but should be part of the discussion

How about a major wind back of overly generous politicians super. I doubt whether the likes of Albo and Wayne Swan et al need the tax payer to fund pensions in the order of $300-400 k pa indexed for life. Seems overly generous!

John Abernethy belled the cat on the relatively hidden fact that presently the tax payer is paying out $20 B pa for retired public service pensions, and growing, and that the Future Fund is going to be woefully inadequate at covering these and future obligations. What's good for the goose......

Ah but that would require real reform, guts and taking on the unions etc

“many facing the Div 296 tax will withdraw super funds and update the family residence or seek out other forms of tax effective investment to side step the tax”

If over a 40 + year working career you have lost at least one HALF of your income/wealth to income taxes, sales taxes, GST, stamp duties, LCT, budget repair levies, gun levies, rates and property taxes, CGT, etc etc. it should not be a surprise that you may want to take steps to protect the other HALF from the clutches of revenue hungry governments that don't always spend it that well.

GeorgeB, I hope you haven't used roads, hospitals or schools, relied on ambulance, police or firies for assistance, enjoyed the societal benefits of government services or generally lived in Australia. If you have, then you've benefited from the half of your wealth that you have supposedly lost. 

Well said . Been there done that apparently
We have done too well of a job .so now they say it is tax avoidance .say it long enough
And pepole will believe it

"Nirvana in the socialist world (where Australia is heading) is that regardless of how much you contribute or save, everyone gets the same!":

No need, or point, to struggle to improve. No progress.

Make super uncompetitive with, or more hassliferous than, Palazzos and Tax Havens and watch it wither.
'Show me the dis-incentive, I'll show you the outcome.'

Better to have a legal Tax Haven domicile in Australia, called 'Super', which invests locally creating business, employment, taxes, repatriated profits.

Alternatively, abolish:
. Super,
. Age Pension Means Tests,
. Inflation 'Stealth Tax',
. Uncompetetive tax rates.

I would believe if the government changed 296 to:

1. Drop the threshold to $2m
2. Index it in line with the current transfer balance cap (TBC) from 1st July of $2m
3. Make the tax on fund income (realised capital gains) on the proportion over the TBC.

Almost everyone would say fine, we could all move on.

The ultimate stupidity of 296 is large balances will potentially be removed and the government will not collect the 15-17% of CAPITAL of the taxable component when these large account members die. The benefit to the Commonwealth will therefore be vastly overstated to their likely realisation of tax revenue. Time to go back to the expenditure side of the budget Jimbo.

“if the government changed 296 to: Drop the threshold to $2m”
Making the div 296 tax threshold the same as the TBC threshold would effectively mean that funds in retirement are taxed either at 0% below the threshold or 30% above, thus eliminating the 15% threshold and making the system less progressive.

“The ultimate stupidity of 296 is large balances will potentially be removed and the government will not collect the 15-17% of CAPITAL of the taxable component when these large account members die.”

This comment ignores the reality that unusually large super balances were accumulated via large non-concessional or after tax contributions which are not subject to the death tax. In fact one strategy to reduce this tax in retirement is to re-contribute pension funds as non-concessional to reduce the taxable proportion.

"The tax on unrealised capital gains ... is messy, complex, and unnecessary."

I'm sorry, but anyone with this view doesn't understand Div 296 or the complexities of alternative ways of increasing tax on large balances. Div 296 tax can be calculated by the ATO - very simply - from data it already receives, no matter how many accounts an individual has. But to do that, the earnings base has to include unrealised gains. There is not enough data available to the ATO to exclude URG from an individual's earnings calculation.

Anyone can have any number of super accounts. And no-one has mounted an argument as to why this should not be permitted (as opposed to why having only one account is often in a person's best interests). And your super fund trustee doesn't know what other accounts you hold or what your TSB is.

So, unless that changes, to get the URG data for every individual with a TSB >$3m, the ATO would have to get URG data for EVERY account in every super fund. That's a huge extra cost, just to raise some tax on a small percentage of individuals (or to push their excess out of the super system).

The Div 296 "tax on unrealised gains" is not "messy", nor is it "complex". And, if an additional tax is to be levied without a major reporting impost on all super funds, it doesn't seem to be "unnecessary".

To me, the obvious alternative would have been to require a proportion (say, 20%) of the excess over $3m at 30 June to be removed in the following financial year. Not the whole of the excess, because the balance will have moved (up or down) by the time the ATO has collated and analysed its data. (Therefore, a hard cap is simply not practical.)

This withdrawal requirement would have its own problems, including rules for any limits to how much can be removed and what would constitute compliance with the (say) 20% requirement. But the bigger problem for those who hate Div 296 would be the need to sell off part of the farm - and pay tax on the realised gain.

"There is not enough data available to the ATO to exclude URG from an individual's earnings calculation.":

Not enough data reported to ATO. Currently.

Just need to break reported Member 'Allocated earnings' into:
. Member Real allocated earnings, and,
. Member Unrealised (imaginary) earnings.
and add to tax return / report to ATO.

A trice. Data is currently available at Member level. Not reported because ATO did not ask.

A reminder, that a couple with $1.5 m each, could find a surviving spouse with $3m in superannuation when a partner dies. I suspect people with over $3m will quickly escalate.

I used to encourage my adult children (in their late thirties) to contribute extra into Super. But not any more! There are better more flexible vehicles to make investments as this won't be the last change from this Govt.

it doesn't matter if people can afford to pay it. Taxing unrealised gains is fundamentally wrong and just daylight robbery. It's the start of a slippery slope.

No one needs more than 3 million in superannuation to have a dignified retirement. It’s daylight robbery to allow this accumulation of wealth to continue.

It’s a clunky tax on increasingly excessive wealth, closing an obvious inheritance loophole exploited, for the most part, by very wealthy people.

Hopefully it is the start of changes to make our tax system fairer.

It’s perfectly fair to close tax loopholes, to ensure superannuation functions as intended.

I've said the same since murmurings of this new tax started a few years back.

$3M is more than fair for a Superannuation Account, if you have more or want more for retirement it doesn't need to be in Superannuation.

They should just Cap it at $3M (indexed like the TBC is)

We need to be careful not to conflate the morality of taxing unrealized gains which may be volatile and have little or no bearing on actual gains, with the debate about what should be a reasonable cap on super (Paul Keating sometimes called the father of our super system thinks it should be about $5m). In any event it should be an amount that will (conservatively) generate in retirement a fair margin over the aged pension, otherwise what is the incentive to sacrifice current for future consumption (assuming that aged pensions are not universally abolished).

" In any event it should be an amount that will (conservatively) generate in retirement a fair margin over the aged pension, otherwise what is the incentive to sacrifice current for future consumption (assuming that aged pensions are not universally abolished)."

Nirvana in the socialist world (where Australia is heading) is that regardless of how much you contribute or save, everyone gets the same!

If no-one needs more than $3m in super. Put a cap on super balances at $3m(indexed) and pay out the balance regardless of age.

Why doesn't the government do this? Probably because they would prefer the money in the highly regulated super environment where they can tax it