The implications of the $3 million super tax on unfunded pension schemes.

Last week, a Senate Committee delivered its majority recommendation to pass the $3 million super tax without alterations. It appears that the Committee’s decision was influenced by Treasury’s observations, which emphasized the need for consistency across different types of superannuation interests in the draft regulations for defined benefit interests.

The Committee’s report highlights Treasury’s affirmation that the calculation of interests under the proposed changes is designed to ensure uniformity between defined benefit members and accumulation members.

The primary objective of these proposed Bills and associated regulations is to refine the targeting of superannuation tax concessions applicable to assets accumulated under the Superannuation Guarantee arrangements. The reforms aim to elevate the maximum headline marginal tax rate on superannuation fund earnings from 15% to 30% for earnings corresponding to the proportion of an individual’s Total Superannuation Balance (TSB) exceeding $3 million. This initiative introduces a new Division 296 into the Income Tax Assessment Act 1997. Earnings from superannuation assets below the $3 million threshold will maintain a tax rate of 15% or remain exempt from income tax if held in a retirement pension account.