While your superannuation is in accumulation phase, the earnings on your superannuation capital is taxed at the concessional tax rate 15%. Once your superannuation commutes to pension phase, there is no tax payable on earnings.
By restricting additional contributions in excess of Employer Contribution for superannuation balances over $1.6 Million, you are forced to accumulate your wealth outside of super. This generally leaves you in a position of paying tax on your earnings at your marginal tax rate, which can be up to 47% (including Medicare Levy) should you earn over $180,000 per annum. A summary of marginal tax rates for the 2018/19 Financial Year below:
|Income||Marginal Tax Rate
(Excluding Medicare Levy)
|$0 – $18,200||
|$18,201 – $37,000||
|19 cents for each $1 over $18,200|
|$37,000 – $90,000||
|$3,572 plus 32.5 cents for each dollar over $37,000|
|$90,001 – $180,000||
|$20,797 plus 37 cents for each dollar over $90,000|
|$180,001 and above||
|$54,097 plus 45 cents for each dollar over $180,000|
That’s a huge difference in tax rates which provides significantly greater tax revenue for the government.
There are ways to get more money into super once your balance is over $1.6 Million – T&C’s apply. In addition, there are investment strategies available outside of super which have great tax advantages.
To find out more, contact us today.