With the Government releasing Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2023 for consultation, much of the attention will rightly be given to the calculation of earnings, however, it’s one of the earnings adjustments that has caught my eye and whilst its exclusion is welcome you can’t help but wonder why the Government have included it and not other measures.
To be specific, the draft Bill introduces us to the concept of adjusted total superannuation balance, which in essence is a member’s total superannuation balance at the end of the year plus (+) withdrawals minus (-) contributions. We were introduced to this concept via the consultation period without certainty about what counted as a withdrawal and a contribution – now we have it spelled out for us.
Div 296 withdrawals
Of note, the new Division 296 defines “your withdrawal totals” at Section 296-50 to include, amongst other things:
The amount of a payment made during the year by a superannuation provide from a superannuation interest of yours in relation to a release authority issued under Division 131 or 135 in Schedule 1 to the Taxation Administration Act 1953, other than a release authority that relates to a first home super saver (FHSS) determination.
For those with a FHSS release authority, there is a formula that has been put in place to preserve the tax concessions for the associated earnings calculated under the scheme, meaning that the amount added back in as a withdrawal excludes the earnings.
An associated earnings question
So the question is, why has there not been a similar measure introduced for the associated earnings attributable to excess non-concessional contributions (NCC)? The whole concept of releasing 85% of the associated earnings for excess NCCs was based on the premise that those earnings should have been made outside of superannuation and therefore they are going to be treated as such and taxed accordingly.
Given that this new measure has been introduced to reduce tax concessions for certain individuals, it’s unnecessary to include within the measure existing measures that already reduce tax concessions.
It’s just another element that highlights the inequity on basing earnings on an unrealised member balance.