I would like to clarify a couple of things, including something I wrote last time I posted.
If a person has more than (the current) $1.9m in a pension account, the excess must be transferred back to accumulation phase or withdrawn as a lump sum. If not, it is subject to penalty tax. Source Macquarie Technical website.
Secondly, (and this is what I got wrong previously), any amounts held in pension phase counts towards the Total Superannuation Balance (TSB) and forms part of the figure of $3m when the extra tax kicks in. Source Fidelity
I was correct in stating that the extra 15% tax is only on any amount over $3m.
So, if someone has $1,9m in a pension phase, and $2m in accumulation phase, their TSB is $3.9m.
In this case, $1.9m in pension phase is tax free, both for earning tax and income payments.
Of the $2m in the accumulation phase, $1.1m is subject to the normal 15% earnings tax but the excess - $900,000 will still be subject to the normal 15% earning tax, but any excess will be taxed with an extra 15% and will be paid by the member (not the fund)
The problem arises regarding the unrealised capital gains which can be a problem if funds are held in illiquid assets, and also the lack of indexation, which in the future will draw in many more people, not just the 0.5% that the Government is quoting now.
Hope this helps.
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