The federal government last week announced changes to the taxation of high superannuation balances.
Under the proposed changes, individuals with superannuation over $3 million will have an additional tax of 15% levied on a proportion of their superannuation earnings from 1 July 2025. Below is a brief summary of the key aspects of the changes and what they mean.
It is important to note the proposals are not law and could change as a result.
- Measure applies only if an individual has more than $3m in total super as at 30 June 2026 (note this is $3m per individual, not per fund)
- Total super includes all an individual’s accumulation and pension accounts across all superannuation funds (all amounts are pooled together for the total super calculation)
- The $3m threshold will not be indexed
- The additional tax of 15% will apply on the proportion of the earnings of an individual’s total superannuation balance for a particular financial year
- The ATO will use a prescribed formula to calculate what proportion of the earnings will be subject to the additional 15% tax
- The formula will calculate the difference between the members total super balance for the current and previous year and adjust it for contributions and withdrawals (unrealised gains and losses will therefore be included)
- No tax refunds will be issued for years where an individual’s total superannuation balance decreases, however a loss can be carried forward and used to offset earnings in future years
- The administration of the tax will operate similar to the current Division 293 regime whereby a tax assessment will be issued to the individual personally. The individual will have the choice to pay the tax or elect for it to be paid out of super
- Individuals who hold multiple super accounts will be able to elect which fund that pays the tax
|Consider Garry who had a total superannuation balance of $3.7m at 1 July 2025.|
Garry’s superannuation balance has grown to $4.0m at 30 June 2026 (approx. 8% return).
Garry did not make any contributions and did not make any withdrawals during the 25/26 financial year.
To calculate the additional 15% tax payable for the 25/26 financial year, there are 3 steps:
Step 1 – Calculate the proportion of Garry’s balance that is above $3m at 30 June 2026
($4m – $3m / $4m) = 25%
25% of Garry’s superannuation is above $3m at 30 June 2026
Step 2 – Calculate Garry’s superannuation earnings for the 25/26 financial year
$4m – $3.7m = $300,000
Note if Garry had made any contributions or withdrawn any benefits, the calculation above would need to be adjusted to reflect this.
Step 3 – Apply the additional tax
The additional 15% tax that Garry will receive an assessment for is as follows:
25% (Step 1) x $300,000 (Step 2) x 15% = $11,250 additional tax
Garry would have the option to pay the $11,250 tax personally, or he can elect to have his superannuation fund pay it.
Where to from here?
The announcements have already prompted many questions from clients about their SMSF structure.
Whilst we invite conversation and encourage discussion on the changes, we emphasise there are no immediate or reactive decisions for individuals to make at this point in time.
It’s important to note this change is still very much in its infancy and the government will inevitably refine, update and make amendments to the proposed legislation. There’s also every likelihood this change may not even be enacted. Regardless of the changes, superannuation will continue to be one of the (if not the most) tax effective structure to accumulate wealth for retirement.
Davidsons have been working with clients over a number of years to manage and keep abreast of legislative change and the recent superannuation changes are no different.
Please contact Simon Abbott on 5244 6867 in relation to any queries regarding your Self Managed Superannuation Fund.
Please note the information in this article is general in nature and should not be considered advice. Davidsons is not licensed to provide any financial product advice nor make any recommendations in respect of any financial product. Therefore we cannot recommend that you make a contribution to your superannuation fund. If you require such advice, you will need to consult a financial adviser who is licensed to provide financial product advice before you make a decision on a financial product.
This article was written by Manager of Self Managed Superannuation Funds Simon Abbott.