Major retirement warning as Aussie's 'hard-earned' superannuation to be raided: 'They played by the rules'
A financial adviser has urged Aussies to keep calm ahead of major changes to the way superannuation is taxed. Tax rates are set to double for Aussies with super account balances worth more than $3 million, following Labor's landslide election win.
Mintwell financial adviser Josef Jindra told Yahoo Finance there was a 'tangible sense of unease' amongst his clients ahead of the looming change, particularly those who have 'spent years' building up their retirement balances. The change to increase the tax rate from 15 to 30 per cent for earnings in the accumulation phase is due to kick in from July 1, subject to legislation passing parliament.
'They've played by the rules, made sacrifices, and now they're facing a significant increase in tax on a portion of their hard-earned retirement savings,' Jindra said.
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'The psychological impact of seeing the tax rate jump to 30 per cent on balances exceeding $3 million is completely understandable.'
However, Jindra has urged Aussies to 'maintain perspective' when looking at the practical implications of the change.
'While 30 per cent is undeniably a substantial tax rate, it only applies to the portion of the balance above the $3 million threshold,' he said.
'For the vast majority of Australians, this change will have no direct impact on their superannuation, as their balances simply don't fall into that range.'When announcing the change back in 2023, Treasurer Jim Chalmers noted the change would apply to around 80,000 people, or about 0.5 per cent of the population by wealth.
According to ASFA research, the average balance for men aged 15 and over is $182,667, with a median balance of $66,159.
For women, the average balance was $146,146, with a median balance of $52,075.
But Jindra said the view that the cap would only impact a small, high-net-worth minority was 'short-sighted'.
The government has said it won't index the $3 million threshold, which means more people will eventually be captured by the cap over time.
Modelling by AMP Capital deputy chief economist Diana Mousina found the average 22-year-old today could retire with more than $3 million in their super fund due to wage inflation and compound interest.
If you are approaching or have already exceeded the $3 million mark, Jindra said there are strategies you could consider to deal with the increased super tax.
'It's about being proactive and exploring ways to manage their retirement savings effectively,' he told Yahoo Finance.
'This may include planning withdrawal strategies to stay below the threshold, diversifying investment holdings outside of superannuation to enhance flexibility, and reducing exposure to the higher tax rate.
'Estate planning has also become increasingly important to ensure assets are structured in a tax-effective way for future beneficiaries.
"For some clients—particularly those seeking greater control—we're also considering Self-Managed Super Funds (SMSFs) and the strategic opportunities they present.'
It could be worth getting financial advice from a licensed professional based on your individual factors, including your age, financial and family circumstances.
Jindra said the policy change reflected a broader shift in how super may be viewed and taxed in the future and highlighted the importance of regularly reviewing financial strategies and staying on top of changes.
'In the end, while the increase in the tax rate is a significant development that warrants attention, it's not cause for alarm for most,' he said.Sign in to access your portfolio
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