Market VS Super Returns

Hi David,

We don’t do tax advice at MM, so here’s a general take on the situation;

The key difference is that super funds and individual investors are taxed under different systems.

• Most super funds pay tax at the fund level (generally 15% on earnings and 10% on discounted capital gains).
• Whereas individuals outside super pay tax at their personal marginal rate, with access to the 50% CGT discount for assets held longer than 12 months (until 1 July 2027)

The proposed Division 296 tax doesn’t change how super funds invest. Instead, it imposes an additional 15% tax on earnings attributable to the portion of an individual’s super balance above $3 million. Large industry, retail super funds & SMSF’s continue to invest under the same tax rules—they simply administer the additional tax for affected members.

So while it can appear that “super funds are treated differently”, the distinction is really between the tax regime applying inside super and the tax regime applying to investments held personally. Parliament’s rationale is that superannuation receives concessional tax treatment because it is intended to provide retirement savings, whereas investments held outside super do not receive the same concessions.

However, much as these changes are worrying many investors, especially as they fear “what’s next”. The changes to property investing should ultimately make equities, especially those paying a fully franked dividend more attractive but this change in sentiment may take time to percolate through. We simply don’t see how these changes improve the supply of houses, which is the Govts stated objective.