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The Australian Federal Government has proposed changes to the tax concessions for super balances exceeding $3 million. At present, individuals are able to hold up to $1.7 million in superannuation balances without having to pay additional taxes. However, the proposed change will see the tax concession reduced for balances exceeding $3 million.

Under the proposed changes, any amount in a super account over $3 million will no longer receive the current tax concessions on investment earnings, but will instead be taxed at a higher rate. This means that any earnings on the excess amount over $3 million will be taxed at the top marginal tax rate of 45% instead of the current concessional rate of 15%.

The aim of the proposed change is to increase fairness in the tax system by ensuring that the wealthiest Australians are not able to use the superannuation system to avoid paying their fair share of taxes. The government argues that the current system disproportionately benefits the wealthy, who are able to take advantage of generous tax concessions to accumulate large super balances and avoid paying taxes on investment earnings.

The proposed change is still subject to legislative approval, and it is uncertain when it will be implemented. It has attracted criticism from some quarters, who argue that it will discourage people from saving for retirement and could lead to a brain drain as wealthy Australians seek to move their assets overseas to avoid the higher tax rates.

Read the Australian Government Treasury factsheet here.