2023 Federal Budget – Summary of Superannuation Changes

Posted 11 May

2023 Federal Budget – Summary of Superannuation Changes

Limiting Superannuation Tax Concessions

For those with a superannuation balance exceeding $3 million, the Government is reducing superannuation earnings tax concessions.

From 1 July 2025, earnings on balances exceeding $3 million will be taxed at 30% instead of the concessional 15%. Under the current proposal:

• The $3M cap is un-indexed under the current proposal in contrast to the transfer balance cap.

• Unrealised capital gains would be included.

• Discounted capital gains could be taxed at 25%, in contrast to the maximum tax rate of 23.5% for an Australian resident individual taxpayer.

Earnings on balances below $3million will continue to be taxed at the concessional rate of 15%.

Aligning Super Guarantee with Take Home Pay

With the aim of providing better retirement outcomes for employees, the Government will introduce legislation requiring employers to pay super on payday from 1 July 2026.

Currently employers are required to pay the Super Guarantee on at least a quarterly basis. This timing will be changed so employers will be required to pay superannuation on the same day as payday.

This will require a cashflow adjustment for businesses to allow for this change. The government anticipates that more frequent super payments will make employers payroll management smoother with fewer liabilities building up on their books.

For employees, receiving their superannuation guarantee contributions earlier and more frequently throughout their working life with result in higher retirement savings.

Clarifying Non-Arm’s Length Income

The non-arm’s length income (NALI) provisions will be amended to provide greater certainty to taxpayers. The concept of NALE (Non-Arm's Length Expenditure) created many problems when the definition of NALI was amended in 2019. A consequence included the 'tainting' of some, or all, income in the superfund as NALI that is then taxed at 47% instead of the concessional rate of 15%.

To address the above and other issues, NALI provisions will be amended to:

• limit the amount of income which will be treated as NALI because of a general expense (that is, because it is NALE) to twice the amount of the general expense. This will prevent the entire income of the fund being treated as NALI, even for a relatively small expense;

• exclude member contributions from being treated as NALI;

• exempt large APRA regulated funds from the NALI provisions for both general and specific expenses of the fund. In effect, this would switch off the application of the NALE provisions for large APRA funds; and

• exempt expenditure incurred prior to the 2018-2019 income year (the year when the NALE provisions were introduced). 

The date of effect is currently unknown.

Contact your WDF team member if you would like to discuss how the changes announced in the budget might impact your superannuation. Phone 02 6921 5444 or email accountants@wdf.com.au

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