Superannuation rules, super changes, super management

Whose super is it? And what’s just changed?

Last week, after much heated debate, the Albanese Government announced a change to the way super will be taxed. Even more heated debate followed. And most of it seemed to be focussed on ‘whose super is it’ and ‘is the government coming after your money?’ debates.

Today we explain the detail of the new super rules, who will be affected and by how much. 

But we also drill down more deeply to explore some of the ways you might maximise the amount you have, without penalty.

Last Wednesday Federal Treasurer Jim Chalmers announced changes to the way super will be taxed from 1 July 2025. It seems that, rather than wait and announce this change as part of the May Budget, the Government wants to stop speculation and simply tell those affected what will happen.

It can be difficult to separate facts from debate when it comes to changes to retirement income rules, so here are the facts:

Who will be affected?

Those superannuants who have super balances in excess of $3 million. The limit applies to your total superannuation balances , including income streams, not just the amount in each account. This is estimated, by Treasury, to be 80,000 Australians or 0.5% of Australians with super. So 99.5% of those with money in super will not be affected.

What is the change?

Those accounts that are still in accumulation (saving) mode will be taxed at the rate of 30% on earnings on the amount of super they have in excess of  $3 million. They will still be taxed at the current rate of 15% for the first $3 million as they are now. If accounts are in an income stream such as an account based pension, no tax is paid on the earnings.   .

Why is this change being made?

This cap on 15% taxation will add about $2 billion per annum to Federal Government coffers. As part of the proposed consideration of the purpose of super , the Government has noted that it believes a $3 million nest egg is sufficient for a dignified retirement. And that higher amounts should not be in a tax-favoured environment when the median savings in super for men and women about to retire (aged 60-64) are $138,000 and $108,000 respectively.

So when we remove the hype from some of the reporting, it is not a case of any government ‘stealing’ someone’s nest egg. It is an increase in the rate of taxation on the earnings on the amounts above a $3 million cap for less than one per cent of the population.

There really is no question that your super remains your money, under your control.

Which leads us to perhaps the most important point in this discussion, which is how ‘control’ of your super can be exercised.

Top level super rules

What you can’t do:

  • Access your balance, except in exceptional circumstances, before Preservation Age.
  • Avoid Tax before this – you will pay tax on the earnings on your super of 15% super  in the accumulation phase, but not in decumulation (commonly understood to mean the activation of an Account-based Pension)

What you can do:

  • Choose you super fund
  • Decide on your investment strategy
  • Decide on the investment products and asset classes you want
  • Add certain extra contributions
  • Withdraw lump sums when you have retired and reached preservation age

As you can see from the above points, whilst there are a few restrictions, there are also a lot of ways you can actively manage this money both before and after preservation age. Putting your money into super should never mean a ‘set and forget’ mindset about these savings.

What is ‘active’ super management?

There are many strategies and actions you can take to improve your super balance. We asked our advice team which questions about super they get asked the most.

Starting next week we will share their answers and case studies in a two-part summary over the following two weeks:

The first article will address Your super and the Age Pension – during accumulation, decumulation, and ways some people can maximise their entitlements.

The second part will look at your super and your mortgage.  Many retirees reach Preservation Age and simply want to use now accessible funds to pay down their mortgage, particularly in the current interest rate climate. But is this always the smartest way to respond?

Staying in control of your super is essential to reduce money worries in retirement.

Super, Age Pension entitlements and private savings form a complex mix, with multiple rules. Knowing these rules is your first step to improving your retirement finances.
There are many options available to maximise your income or financial wellbeing. If you would like to understand more about super, please talk to us today.

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