Tax forces super shuffle

SUPERANNUATION funds are expected to be stripped of an extra $2 billion investment earnings each year as the government takes a bigger tax bite out of retirement savings.

However, in an unexpected spin-off, women savers are set to benefit from the tax change.

Under new Federal Budget rules an additional $225 billion of superannuation assets are to be taxed, after losing their taxfree status last year.

According to the Australian Institute of Superannuation Trustees and Industry Super about 5 per cent of managed fund members will potentially be affected by the new tax, while in the self-managed sector it is about 25 per cent.

Self-managed funds have higher average balances compared with managed fund members and the new tax applies to individual funds with more than $1.6 million.

Despite the extra slug to retirement savings, there has been an unexpected benefit.

DB Lawyers superannuation counsel Bryce Figot says there has been a surge in couples rebalancing their pension funds to have equal amounts.

“One of the most popular strategies that has come out of the new rule is withdrawals and recontributions between couples,” Mr Figot said. “Not that that was the government’s intention but it has especially helped women’s super and that’s very positive because women have far less in super than men. But there is now a real incentive to take money out of one account and recontribute it to a spouse account.”

Despite the extra tax on accounts over $1.6 million, Mr Figot said the benefits of super outweighed any alternative.

“Superannuation is still the vehicle that gets the best results when it comes to having the least tax payable,” he said.