Dear Friends
Election Update – how it (may) have an impact on your super balance
Now the dust has settled, the important thing to know is – “how will the re-election of the Albanese government affect me?”
For most of us, it will be business as usual. I have attached an article from MLC ‘Federal Election 2025 Analysis’ for the curious who want to read in more detail.
Yes, there will be some minor tax cuts, and the progressive superannuation approach is likely to proceed unhindered, so those who are contributing will see increases to the Super Guarantee. We will also see contribution limits progressively increase, as legislated.
There is one big topic which will have an impact on a ‘fortunate’ few. The important point to remember is that we have already developed strategies to mitigate the impact of ‘Division 296’ – an additional 15% tax on earnings for super balances over $3 million. (This tax is on top of the standard 15% super tax, bringing the total to 30% for balances above the $3m threshold).
It is planned that the additional tax will become law on 1 July 2025, even though it may not receive Royal Assent by that date.
It is vital to remember, however, that the tax is based on a member’s financial year-end Total Super Balance (TSB). This means that if, as expected, first year of operation will be the 2025/2026 year, it is the adjusted TSB on 30 June 2026 (not 2025) that is relevant.
In other words, we will have until 30 June 2026 to take the necessary action.
So, as always, there is no need to panic. We have time to plan and implement appropriate strategies, and we have this covered for you. Naturally, we first need to see the final version of this law, but for now, “Stay in your seats” is my best advice.
For those of you who may be affected by Division 296, it is worth bearing in mind that I have been considering solutions to similar situations for some time. I have attached the article ‘Death Without Taxes’ in a previous edition of Allan Kohler’s Eureka Report. It outlines an Insurance Bond strategy… modelled three years ago, due to the legislated Transfer Balance Cap (TBC) legislation – well before Division 296 was announced.
This strategy was based on super fund tax of 15% (on balances in excess of the TBC) and Death Benefits Tax (DBT) of 17% - and it worked. In other words, it was tax-effective even before the proposed introduction of Division 296!
Now, with a Division 296 Tax of 30% + DBT of 17%, Insurance Bonds are back as a very sound option, although there are other strategies as well.
I will discuss these with clients who may be affected, at our next review.
As always, if I or any of our team can be of assistance, please don’t hesitate to get in touch by either calling (08) 8130 5130 or email admin@marinisgroup.com.au
Yours sincerely
Theo Marinis CFP®, B.A., B.Ec., CPA., MCIFAA
Financial Strategist
Authorised Representative
