Commissioner of Taxation Chris Jordan. Picture: Kym Smith
MASSIVE superannuation fund balances are growing in number as wealthy Australians make the most of super’s tax benefits for their multimillion-dollar nest eggs.
More than 3000 Australians now have super fund balances above $10 million and a lucky six have $100 million-plus balances, up from four last year.
It highlights how generous super’s tax breaks can be and comes at a time when both political parties are examining increasing taxes on super, particularly for high income earners and large balances.
Tax Commissioner Chris Jordan told the SMSF Association national conference in Adelaide that there were now 2184 self-managed super funds with a balance above $10 million.
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“Some of those have got up to four members,” he said.
“There’s now six funds that have more than $100 million, and I can assure you that we have looked at every one of those six. It’s gone up from four to six over the last year,” he said.
Mr Jordan said some of the giant balances were “accidents of history” where people had bought company shares in their super several decades ago and the companies’ value surged.
He said the $10-million plus funds represented less than 0.5 per cent of Australia’s 557,000 SMSFs, which had an average balance of just over $1 million and average member balance of $564,000.
Mr Jordan said the ATO also understood that there were 944 super fund members in APRA-regulated funds, such as retail an industry super funds, with balances above $10 million.
Under current rules, retirees pay zero tax on any income and capital gains earned from assets held in their super funds once their fund is paying them a pension. Outside super they are usually taxed.
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Treasurer Scott Morrison, speaking at the conference, gave a strong signal that superannuation tax breaks for high-income earners were likely to be cut, but not for people already retired.
“It’s clear that we are going to have to make some hard decisions when it comes to how we address the targeting of these tax concessions going forward,” he said.
“Nothing has been decided but that point is fast approaching.
“The purpose of the concessions is to ensure that people are more independent in their retirement. The primary purpose now, particularly when you are targeting tax incentives, is to target at those who are most likely to be at risk of being more reliant on a pension payment in retirement.”
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Advisers say that superannuation a great place for wealthy people to put their retirement savings, and also good for the rest of us.
“You can draw the income out tax-free, and it’s tax-free internally (in retirement),” Wise Owl Financial adviser Allan Ward said.
It’s often a case of the bigger the balance, the bigger the benefit. “A lot of it is affluent people who have good advisers around them,” Mr Ward said.
With both sides of politics examining super to make it “fairer”, Mr Ward said it was unlikely the current rules would continue. “There will be change, but I am confident that governments will retain some tax incentives,” he said.
Treasurer Scott Morrison, speaking at the conference, gave a strong signal that superannuation tax breaks for high-income earners were likely to be cut, but not for people already retired.
“It’s clear that we are going to have to make some hard decisions when it comes to how we address the targeting of these tax concessions going forward,” he said.
“Nothing has been decided but that point is fast approaching.
“The purpose of the concessions is to ensure that people are more independent in their retirement. The primary purpose now, particularly when you are targeting tax incentives, is to target at those who are most likely to be at risk of being more reliant on a pension payment in retirement.”
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