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Modify Australian Superannuation Account types

The existing two superannuation (Australia) account types (superannuation - concessional, and superannuation - non-concessional) seem to relate (incorrectly) to the concessional (before tax eg. SGL, Salary Sacrifice, personal deducted contributions) vs. non-concessional (after tax) contribution types/methods that are allowed to be made into a superannuation account. These are not asset/account types as such. The actual superannuation account types should be : accumulation phase (available pre age 60, generally 15% tax on earnings and 10% tax on capital gains), and retirement (pension) phase (age 65 or age 60 and retired. Generally 0% tax on earnings and capital gains. In pension phase there is a mandatory minimum (but no maximum) annual withdrawal rate that is age-based – see table 11 at the ATO link provided ). There is also a special type of accumulation phase account (TRIS - transition to retirement income stream) account that can be setup at age 60-65 that still has 15% tax on earning and 10% tax on realized capital gains (same as in accumulation phase), but has to pay out a tax-free ‘pension’ payments (of between 4% and 10% of account balance each year).

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  • 18 February 2024 Ralph Morgan suggested this task

  • 19 February 2024 Kyle Nolan approved this task

  • avatar
    J Z

    Currently, PL has a single option to specify the tax rate for superannuation accounts, defaulting to 15%. I tested this with an account configured to have 0% p.a. income and 10% p.a. growth, and the growth is indeed taxed at this rate.

    The tax is reported as “Tax on Earnings” in the right panel of the main plan chart, but it is not included in the Cash Flow or Tax Analytics sections. I haven’t figured out the rationale for why different types of taxes appear in those places…

    When this change is implemented, tax should be calculated separately for income and growth. However, in practice, the capital gains tax is often even lower than 10% and isn’t easy to model.

    Firstly, most people are invested in pooled funds, where the tax drag of realized capital gains is spread across all members rather than being individually assigned to an account that is drawing down or rolling over to a new fund. The fund doesn’t necessarily need to realize capital gains to fund an outflow, as it is likely matched by an inflow.

    Secondly, even in a non-pooled fund (such as the direct investment option of a retail fund or a self-managed super fund (SMSF)), some or all of the accumulation account can be converted to a retirement phase account without a CGT event. After this conversion, capital gains are untaxed.

    So, at a first approximation, taxing the capital gains in both accumulation and retirement accounts at 0% is probably closest to reality.

    It is also worth mentioning that funds typically quote their performance as a single figure (return = growth + yield - taxes). That said, I don’t mind having the dividend/growth split out in PL and linking these to the base assumptions of the plan. It will just be necessary to tax them at a separately configurable rate.

    04 August 2024