New 30% Tax Rate On $3 Million Superannuation Balances

Treasury has released draft legislation to enact the Government’s plan to increase the tax rate on earnings on superannuation balances above $3 million from 15% to 30% from 1 July 2025. This is the final step before the Government introduces the legislation 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 superannuation 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. They still need to resolve some of the details, such as how the new cap will interact with the Transfer Balance Cap and Downsizer Contributions. The Government has indexed the Transfer Balance Cap to the 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 Government views superannuation as a great big pile of money that can be used to solve any policy crisis (witness the early release of superannuation 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.

They proposed a new objective that emphasises preserving savings, aiming to prevent early access to superannuation for covering lifetime expenses. This might be a fork-in-the-road moment, where superannuation ceases to be the all-purpose solution to every policy challenge. If you want to make an interesting point the next time a superannuation 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

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

Your Aintree Group adviser will calculate this for you, but many people are curious about how it all works and which part of their superannuation earnings the tax will apply 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:

From a planning perspective, for those with superannuation balances close to or above $3 million, 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.

This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice from your accountant and lawyer.