Understanding what is, and is not, included in the calculation of the proposed $3 million super tax legislation is important for formulating an effective tax-minimising strategy, says a specialist adviser.
Natalie Scott, superannuation adviser for the Knowledge Shop, said there are a variety of planning opportunities in regard to the proposed tax that can be considered to get the best outcome for clients.
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“There are some clients that might be making use of their personal tax-free threshold, or their spouse’s balance might be a bit lower,” she said.
“Effectively what will happen is the 30 June 2026 balance of a member will be compared to the 30 June 2025 balance to work out what the earnings are. For an SMSF those balances will include any capital gains and income during the year and it will also include the market value of the assets.”
Scott said as the tax will be based on total superannuation balances, it’s important to understand what this entails.
“The TSB is made up of unrealized gains, so that means that market valuations are going to become very important as are the earnings for the current year, which will then be adjusted for anything that is considered a withdrawal or a contribution,” Scott said.
“Obviously you would add back any withdrawals, and take away any contributions net of tax, and then compare that amount to the previous financial year.”
In regard to what is considered a withdrawal, Scott said the list includes any pension payments, transfers from a spouse, spouse contribution splitting arrangements, as well as super benefits transferred under a family payments split.
“It also includes amounts withheld from excess on tax rollover amounts, which is pretty unusual as we don’t see untaxed rollovers a lot. Usually when someone’s rolling out of one of those defined benefit funds or a Commonwealth fund there might be an untaxed amount,” she said.
“Included as well are valid requested release authorities such as those completed in relation to excess non-concessional contributions.”
The contributions that will be included are non-concessional and concessional contributions, spouse splitting, depending on who is receiving the benefit, and total super balance valuation on the death benefit interest.
“This means that when someone passes away, a member who was a spouse has the ability to commence a death benefit income stream and in the year that they commence that stream it will be removed from the earnings calculation, but moving forward after that, it will be included,” Scott said.
“The same goes for insurance proceeds payouts on death or Total Permanent Disability payments, any foreign superannuation transfers and an increase in the TSB due to a compensation payment.”
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