New 30% tax rate on $3 million superannuation balances

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Treasury has released draft legislation to enact the Government’s plan to increase the tax rate on earnings on superannuation balances above $3m from 15% to 30% from 1 July 2025. This is the final step before the legislation is introduced into Parliament and a step closer to reality. The draft legislation appears largely unchanged from the Government’s original announcement.

The Government has proposed that from 1 July 2025, the 15% concessional tax rate applied to future earnings for superannuation balances above $3 million will increase to 30%.

The concessional tax rate on earnings from superannuation in the accumulation phase will remain at 15% up to $3 million. From $3 million onwards, the rate will increase to 30%. The amendment applies to future earnings; it is not retrospective.

80,000 people’s superannuation balances are expected to be impacted by the measure, but this is less than 0.5% of all Australians with a super fund.

Proposed Changes to Superannuation

One reliable feature of the superannuation system in Australia is that you can always be assured that there will be something to blog about. The Government’s newest announcement is certainly proof of that.

Another reliable feature of superannuation is that any change will generate debate. Controversy, however, does not mean that everyone needs to tear up their retirement planning and start again.

For the moment, we just have the outline of the Government’s proposal. The details are still to be resolved, such as how the new cap will interact with the Transfer Balance Cap and Downsizer Contributions. The Transfer Balance Cap is indexed to Consumer Price Index, whereas the new $3 million cap is not – so what will happen to the Transfer Balance Cap as it starts to near the $3 million threshold?

Until these matters are clarified, it’s worth keeping in mind that superannuation remains the most tax-effective and asset-protected structure available.

A Legislated Objective

One aspect of the proposed changes that has generated less discussion is the proposal to legislate an objective for superannuation. Similar calls have been circulating since at least the Financial System Inquiry in 2014.

The historical concern with superannuation is that government views it as a great big pile of money to be used to solve any policy crisis (witness the early release of super available during Covid). The problem with excessive early releases is that young people who erode their balances early in their life will struggle to catch up over the rest of their working life and will face the prospect of an under-funded retirement.

The proposed new objective emphasises preservation of savings with a view that super should not be accessed early to meet lifetime expenses. This might be a fork-in-the-road moment, where super ceases to be the all-purpose solution to every policy challenge. If you want to make an interesting point the next time a super debate breaks out among your friends, you could quietly note that a legislated objective might just have longer-lasting effects than the proposed 30% cap.

Earnings Calculator & Examples

There are calculations you can do to find out how the additional tax rate will be applied for balances over $3 million.

Your Aintree Group advisor will do these calculations for you, but some people are curious how it will all be worked out, and which part of their superannuations earnings the tax will be applied to.

Earnings calculation in a financial year:

Earnings = Total Super Balance for Current Financial Year – Total Super Balance for Previous Financial Year + Withdrawals – Net Contributions

Proportion of earnings corresponding to funds above $3 million:

Proportion of Earnings = Total Super Balance for Current Financial Year – $3 million / Total Super Balance Current Financial Year

Tax Liability:

Tax Liability = 15% x Earnings x Proportion of Earnings

For example…

Warren is 52 with $4 million in superannuation at 30 June 2025. He makes no contributions or withdrawals. By 30 June 2026 his balance has grown to $4.5 million.

This means Warrens’ calculated earnings and additional’ tax liability are:

Balance growth    $4.5 million – $4 million= $500,000
Proportion of earnings > $3m($4.5 million – $3 million) ÷ $4.5 million= 33%
2025-26 tax liability15% × $500,000 × 33%=$24,750

From a planning perspective, for those with superannuation balances close to or above $3m, it will be important to explore the implications to your personal situation – there is no one size fits all strategy here and what is best for you will depend on your circumstances.

To discuss your estate planning and superannuation needs, contact us today.