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West Australian
22-06-2025
- Business
- West Australian
Bruce Brammall: Don't be bitten by the tight end of financial year deadline to top up your superannuation
Steven Spielberg's original Jaws movie was released 50 years ago last week. Middle of a Northern Hemisphere summer. The movie scared the poop out of a generation of kids, and even more adults. Beaches emptied. Nearly made extinct a generation of the volunteer profession of surf lifesavers. And (coming from a keen golfer) would Greg Norman's adopted moniker of 'Great White Shark' have ever had its influence without Jaws? Hmm. Did Jaws send a shiver down your spine? Good. Tune in to that. I'm trying to rustle up some fear, to prod you into action. June is grand final time for tax and superannuation. A week today is June 30. There are certain things you can do right up until the last day. And some things you can't. Making contributions to your super fund is one thing you can't leave until the dying seconds of the financial year. Certainly not if you're in a 'normal', or Australia Prudential Regulation Authority-regulated super fund. Why? Because the super fund needs to both receive the funds and be able to allocate it to your account by June 30. Banks and super funds are getting better, but still not all electronic funds transfer instantly. Funds are often transferred overnight, while BPAY can still take several days. For example, with certain transactions from my bank, if I transfer money after 5pm on a Friday night, it doesn't leave the account until the Monday, then arrives at the intended account on the Tuesday. And while super funds have been modernising, many still need to actually allocate the money to your account. That is, some funds have the money coming into a big bank account where all members pay to. Then they need to allocate it to your account, which needs to be done by close of business on June 30. So, don't risk leaving it till next Monday. Unless you know your super fund's policy, transfer it by no later than Wednesday, preferably today. If it doesn't arrive, or get allocated, until the Tuesday, the contribution will be attributed to next financial year. The Albanese Government has said it's going to push ahead with implementing its policy on taxing super funds over $3 million at a higher tax rate. This is going to make it even more important that couples, particularly high earners, work together when it comes to their super strategies, including end of financial year contributions. Why? For couples where at least one member is likely to build a large super balance, working together can help minimise tax on your super in the future. You don't want one person hitting $4m in super, while the other half of the couple has $1m. Spouse contribution splitting allows for the transfer of up to 85 per cent of concessional contributions between spouses, after the end of the financial year. If both members make their maximum $30,000 concessional contribution for the year, the member with the higher balance can transfer their contributions to the lower-balance member. If maximum contributions are made ($30,000 times two), one member could effectively end up with $51,000 ($60,000 times 85 per cent) into their account. Done every year, this can be a powerful way of evening up balances. And if you're going to make non-concessional contributions — which has a limit of $120,000 a year, where you can use up to two future years to put in up to $360,000 in one hit — obviously consider putting that into the account of the lower-balance spouse. June is an important month for super fund contributions, for many reasons. For concessional contributions ($30,000 limit), the two most important are making sure you get the tax deduction and the contribution in the right year. If you're an employer, you might want your business to have the tax deductions in the current financial year. While most small businesses don't have to pay their staff's super until 28 days after the end of a quarter, by paying June quarter staff super payments before June 30, you can claim the deduction this financial year instead of next. Note that the superannuation guarantee rate moves up to 12 per cent on July 1. Some might need to change their salary sacrifice arrangements. Don't put it off. If you're going to make contributions, make sure you get them done as soon as possible. Bruce Brammall is the author of Mortgages Made Easy and is both a financial adviser and mortgage broker. bruce@
The Age
23-05-2025
- Business
- The Age
What you need to know about Labor's new super tax
Currently, earnings from super in the accumulation phase (the time when people are still working and contributing to their balance) are taxed at a discounted rate of up to 15 per cent. This will be unchanged for superannuation accounts with balances of less than $3 million. But people with superannuation funds of more than $3 million will face an additional 15 per cent tax on any investment returns (including interest, dividends or capital gains) they earn on the amount above this threshold. For example, someone with a $3.5 million super balance will continue to be taxed the discounted rate of 15 per cent on everything they earn on the first $3 million of their balance. Investment returns on the additional $500,000 will be taxed at 30 per cent. What are unrealised gains? A controversial element of Labor's tax reform is that the super tax would also apply to 'unrealised gains', which refers to the growth in the value of an asset or investment that an investor holds but hasn't yet cashed in. Loading For example, an investor could hold property or shares that increase (and decrease) in value over time. However, unless they sell these assets, any rise or fall in their value is seen as 'paper profits' because they have not yet been converted into cash and locked in. Generally, earnings are not taxed until they hit your pocket. But Labor's tax on unrealised gains would mean Australians with superannuation balances of more than $3 million – while relatively wealthy – would receive a tax bill even if they hadn't actually earned any income (potentially forcing them to sell assets to pay that bill, and reduce the total amount of money in the nation's super pool, affecting returns for all super members). If a person records an unrealised loss one year – where their super balance falls due, for example, to a market downturn – that unrealised loss will be used to offset the tax on earnings from their super balance in future years. The final tax bill is generally paid directly by your super fund to the Australian Tax Office. For self-managed super funds, the tax amount is usually paid through BPAY or using a debit or credit card. What is indexing? Indexation of the super tax – or lack thereof – is another aspect that some people have criticised. Indexing refers to the practice of increasing a threshold or entitlement to change in line with another measure such as inflation, wages or tax. In the case of the super tax, Labor has not promised to tie the threshold for the 30 per cent tax rate to changes in price growth. This is a problem because $3 million this year will not have the same purchasing power as the same amount in 20 years' time. Assuming an inflation rate of 2.5 per cent, an indexed threshold would capture funds with more than $5 million in 2045. While the proposed tax only affects about one in 200 Australians now, it would apply to many more if not indexed. Independent MP Monique Ryan, for example, has criticised the lack of indexation, saying it means the tax could affect all of Gen Z by the time they turn 60. What does the treasurer say? Treasurer Jim Chalmers has stood by the new tax, first announced by Labor in early 2023. Chalmers, speaking on a podcast with Michelle Grattan this week, maintained it was a 'modest change' that still gave concessional treatment – although slightly less so – to people with large super balances. 'This will help us fund our priorities, whether it's Medicare, the tax cuts and other priorities in our budget repair,' he said, noting he had consulted widely on the changes and that the controversial inclusion of unrealised gains was 'the best, simplest way to go about it' according to advice from Treasury. Chalmers also said it was wrong to assume the $3 million threshold would never change. 'There are so many instances in the tax system where thresholds aren't indexed, and from time to time, governments take decisions to raise those thresholds,' he said. 'I'm anticipating that that's what would happen here.' Who is talking about it? Several prominent figures have chipped into the conversation around the super change: among them, former treasury secretary (and author of the Henry Tax Review) Ken Henry and former RBA governor Phil Lowe. Loading In an article in The Australian, Lowe said the change was not an example of good public policy design, saying the government should explore alternatives. In the same article, Henry said the system needed to be more equitable. 'To do that, you do not need to tax unrealised capital gains,' he said, pointing to suggestions in his more-than-decade-old review. What happens next? Chalmers told The Conversation in a podcast that he was yet to start talks with the Senate crossbench. Labor will likely need support from the Greens to get the proposal turned into law.
Sydney Morning Herald
23-05-2025
- Business
- Sydney Morning Herald
What you need to know about Labor's new super tax
Currently, earnings from super in the accumulation phase (the time when people are still working and contributing to their balance) are taxed at a discounted rate of up to 15 per cent. This will be unchanged for superannuation accounts with balances of less than $3 million. But people with superannuation funds of more than $3 million will face an additional 15 per cent tax on any investment returns (including interest, dividends or capital gains) they earn on the amount above this threshold. For example, someone with a $3.5 million super balance will continue to be taxed the discounted rate of 15 per cent on everything they earn on the first $3 million of their balance. Investment returns on the additional $500,000 will be taxed at 30 per cent. What are unrealised gains? A controversial element of Labor's tax reform is that the super tax would also apply to 'unrealised gains', which refers to the growth in the value of an asset or investment that an investor holds but hasn't yet cashed in. Loading For example, an investor could hold property or shares that increase (and decrease) in value over time. However, unless they sell these assets, any rise or fall in their value is seen as 'paper profits' because they have not yet been converted into cash and locked in. Generally, earnings are not taxed until they hit your pocket. But Labor's tax on unrealised gains would mean Australians with superannuation balances of more than $3 million – while relatively wealthy – would receive a tax bill even if they hadn't actually earned any income (potentially forcing them to sell assets to pay that bill, and reduce the total amount of money in the nation's super pool, affecting returns for all super members). If a person records an unrealised loss one year – where their super balance falls due, for example, to a market downturn – that unrealised loss will be used to offset the tax on earnings from their super balance in future years. The final tax bill is generally paid directly by your super fund to the Australian Tax Office. For self-managed super funds, the tax amount is usually paid through BPAY or using a debit or credit card. What is indexing? Indexation of the super tax – or lack thereof – is another aspect that some people have criticised. Indexing refers to the practice of increasing a threshold or entitlement to change in line with another measure such as inflation, wages or tax. In the case of the super tax, Labor has not promised to tie the threshold for the 30 per cent tax rate to changes in price growth. This is a problem because $3 million this year will not have the same purchasing power as the same amount in 20 years' time. Assuming an inflation rate of 2.5 per cent, an indexed threshold would capture funds with more than $5 million in 2045. While the proposed tax only affects about one in 200 Australians now, it would apply to many more if not indexed. Independent MP Monique Ryan, for example, has criticised the lack of indexation, saying it means the tax could affect all of Gen Z by the time they turn 60. What does the treasurer say? Treasurer Jim Chalmers has stood by the new tax, first announced by Labor in early 2023. Chalmers, speaking on a podcast with Michelle Grattan this week, maintained it was a 'modest change' that still gave concessional treatment – although slightly less so – to people with large super balances. 'This will help us fund our priorities, whether it's Medicare, the tax cuts and other priorities in our budget repair,' he said, noting he had consulted widely on the changes and that the controversial inclusion of unrealised gains was 'the best, simplest way to go about it' according to advice from Treasury. Chalmers also said it was wrong to assume the $3 million threshold would never change. 'There are so many instances in the tax system where thresholds aren't indexed, and from time to time, governments take decisions to raise those thresholds,' he said. 'I'm anticipating that that's what would happen here.' Who is talking about it? Several prominent figures have chipped into the conversation around the super change: among them, former treasury secretary (and author of the Henry Tax Review) Ken Henry and former RBA governor Phil Lowe. Loading In an article in The Australian, Lowe said the change was not an example of good public policy design, saying the government should explore alternatives. In the same article, Henry said the system needed to be more equitable. 'To do that, you do not need to tax unrealised capital gains,' he said, pointing to suggestions in his more-than-decade-old review. What happens next? Chalmers told The Conversation in a podcast that he was yet to start talks with the Senate crossbench. Labor will likely need support from the Greens to get the proposal turned into law.
