How will the proposed 30% tax on super earnings above $3m work?
How will the proposed 30% tax on super earnings above $3m work?
The Government has announced that from 1 July 2025, the 15% concessional tax rate applied to future earnings for total superannuation balances (TSB) above $3 million will increase from 15% to 30%.
The Government has announced that the concessional tax rate on earnings from superannuation in will increase from 15% to 30% for those with total super balances (TSB) of $3m or more from 1 July 2025.
While the initial media release mentioned the tax would apply to ‘accumulation balances’, the fact sheet clarifies that it is ‘total superannuation balance’ which, based on its current definition, includes amounts in retirement phase pensions.
How it will work
An additional tax of 15% on earnings will apply to individuals with a TSB over $3 million at the end of a financial year.
The proposed calculation aims to capture growth in TSB over the financial year allowing for contributions and withdrawals. This method captures both realised and unrealised gains, enabling negative earnings can be carried forward and offset against future years.
The intent is to treat defined benefit interests in a similar way but no details are available as yet.
How the tax will be paid
Individuals will have the choice of paying the tax personally or from their superannuation fund and those with multiple accounts can nominate which fund will pay the tax.
Reporting
No change is expected to fund reporting requirements.
Much like Division 293 tax, the Australian Taxation Office (ATO) will perform the calculation for the tax on earnings. TSBs in excess of $3 million will be tested for the first time on 30 June 2026 with the first notice of assessment expected to be issued to those impacted in the 2026-27 financial year.
What’s next?
The proposal is exactly that for the time being. One the proposed enabling legislation is released, a consultation process will follow before it reaches Parliament. Once before the Parliament, it is really down to the Parliamentary process. Lacking a majority in the Senate, the Government will need the support of the Greens at least one more (assuming the Coalition don’t support the legislation). The process is unlikely to be a smooth one and we might see further change before the legislation reaches its final configuration. The simple message is, be aware but don’t react.
Proposed earnings calculation
Earnings calculation in a financial year:
Examples:
Before considering your position on the above changes, please do contact us to discuss if the above may or may not apply to your superannuation fund.
Any concerns?
If you have any concerns about the impact of the proposed changes please contact us here.
Note: The information contained in this update has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs.
You should seek advice before making any decision regarding any information, strategies or products mentioned to consider whether that is appropriate to your own objectives, financial situation and needs.