The Australian Government Debating Possible Changes To Taxation For Voluntary Superannuation Contributions

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Australians who make extra contributions to their super funds to avoid paying higher taxes may soon see that loophole not available. 

Australians contribute 15% tax to their superannuation when making voluntary contributions. That’s almost half the maximum tax rate of 45 per cent, which applies to those who earn a high income.

The government created the system to help people save money for retirement. The main issue is that some people were manipulating the system and not paying their required amount.

The government has said that, for an economy trending towards $1 trillion in debt entering 2022, that would be unacceptable. 

As stated by Federal Minister for Financial Services Stephen Jones at the AFR Wealth and Super Summit, a new approach is being discussed by the government.

The finding spurred this discussion that 32 self-managed super funds held more than $100 million in valuables.

The largest self-managed super fund has over $400 million in assets,” said Jones. “I celebrate success, but the concessional taxation of funds like these has a real cost to the Budget, which needs to be considered.”

According to Jones, the tax breaks associated with a $10 million self-managed super fund could cover more than three aged pensions.

Last month, the federal budget was released and showed that there would be no changes to the tax cuts that are currently in place. The cuts, which will come into effect in 2024-25, are the final stage of Australia’s former government adjusting the taxation system. 

H&R Block tax expert Mark Chapman said the government should assess the issue’s magnitude before making any decisions.

This was a budget for repairing the public finances, helping with the cost of living, and building long-term productivity, not tax changes,” he said.

The 37 per cent tax rate bracket will be eliminated if stage three tax cuts are implemented. The government would lower the rate from 32.5% to 30%, and the threshold for the 45% rate would be lifted by $20,000.

It means taxpayers earning between $45,001 and $200,000 will receive tax at the same rate. The tax break would disproportionately benefit those earning higher incomes, costing over $250 billion to taxpayers over ten years.

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