Q&A: How will the new $3m super threshold tax impact retirement planning?

We also might need to consider if a super fund is the only tool, the only retirement savings vehicle that we use? Or do we use other things as well? Do we think about family trusts or companies? Do we think about investing in our own names? In regards to impacting retirement planning, instead of all retirement savings going to super, do we now start to think about using other vehicles at the same time? If you think you’re going to go above the three million, it’s not really hard to estimate what that additional tax might be.

We ran a webinar on this and go and have a look at that. The formula is all there. It’s not difficult to try and project what that might look like.

The second major point I want to make is that ongoing account balances would need to be reviewed more frequently. We’ll need to look at them more frequently so that if we are approaching balances exceeding three million, do we make a withdrawal? Can we manage that to have a lower overall tax on the amounts above the three million? I think ongoing account balance maintenance is going to become more of an issue because your balances will move up and down and you may need to make some withdrawals to stay within limits.

If we have other retirement vehicles, we might be able to have a lower overall tax. Remember that the first $18,000 that we receive as individual income is tax-free. A family trust for investing where we can distribute profits to who we want, all of those other retirement savings vehicles might be worth considering to sit along our SMSF, alongside our super fund, which might give us a overall better outcome.

The last point that I want to make here to answer the specific question about retirement planning is you now need to give greater consideration to what will happen on the death of a spouse and whether the death benefits are going to be paid to the spouse as a reversionary pension. If that’s the case, it could easily take you above the $3 million cap when you think about your own balances as well. Just something to consider.

Now, in regards to the other questions that came through – Has anything further happened? – the bill that covers this was introduced into the Parliament on 30th of November 2023 and that was the first reading. The second reading, so when they come back after recommendations have been made, has been moved. We’re not sure, or I’m not sure at this point in time when that’s going to be reintroduced into Parliament.

There was not a lot of change from the initial drafting of the rules that was tailored in Parliament. The only change, I suppose that we looked at and we were hoping for was the removal of taxation of unrealised gains, and we were hoping that the bill might contain some form of indexation. Neither of those two things appeared in that bill. At the moment, no real change, apart from the fact that it’s had its first reading in Parliament.

The proposed start date is still 1 July 2025. Therefore, the 2026 is the first year this will apply.

Nothing further that we have at this stage. The information contained on the website in those articles is certainly relevant, and I’ve put there the webinar that we ran on that in April 2023, the things that you need to know.