As of July 1, 2025, the current Government has proposed to reduce the tax concessions available to individuals whose total superannuation balances exceed $3 million. Any balances that exceed this threshold would be subjected to a tax of 30% based on their earnings and growth of any balance that has exceeded the threshold of $3 million.
Application
Starting on 1 July 2025, individuals whose total superannuation balances (TSBs) exceed $3 million at the conclusion of a financial year will be subject to an additional tax of 15 percent on earnings.
This is separate from any tax that their superannuation funds might pay on earnings during the accumulation phase. Consequently, earnings linked to balances over $3 million will typically be subject to a combined headline rate of 30 percent.
This change will take effect from the 2025-26 financial year onwards, and the tax will be applicable to the proportion of earnings (and growth) corresponding to balances above $3 million.
This implies that earnings associated with balances below $3 million will continue to be taxed at a rate of 15 percent or lower.
Earnings are calculated based on the variation in TSB (Total Super Balance) between the start and end of the financial year, taking into account contributions and withdrawals.
If negative earnings occur, they can be carried forward and applied to offset this tax in subsequent years.
Individuals have the option of paying the tax from their personal funds or their superannuation funds, and those with multiple funds can select the fund from which the tax is paid. This tax will be distinct from an individual’s personal income tax and is similar to the current Division 293 tax.
The calculation of earnings encompasses all notional (unrealised) gains and losses, mirroring how superannuation funds presently compute members’ interests.
Notice of Assessment and Reporting Process for Funds
TSBs surpassing $3 million will be assessed for the first time on 30 June 2026, with initial notices of a tax liability anticipated to be dispatched to individuals during the 2026-27 financial year. The Australian Taxation Office (ATO) will notify individuals of their obligation to pay this tax. The ATO already employs superannuation fund reporting to calculate the total sum that individuals have in the superannuation system, encompassing multiple accounts, which is also utilized for other objectives, such as verifying individuals’ eligibility to make non-concessional contributions.
No doubt there will be more detail on the operation of this change provided by the tax office as we get closer to implementation date.
For more information about these changes please click the link to the governments guide: Better targeted superannuation concessions – factsheet (treasury.gov.au)