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 โaccumulation balancesโ, the fact sheet clarifies that it is โtotal superannuation balanceโ 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.
Whatโs 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 donโt 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 donโt react.
Proposed earnings calculation
Earnings calculation in a financial year:
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๐ธ๐๐๐๐๐๐๐ = ๐๐๐ต๐ถ๐ข๐๐๐๐๐ก๐น๐๐๐๐๐๐๐๐ ๐๐๐๐ โ ๐๐๐ต๐๐๐๐ฃ๐๐๐ข๐ ๐น๐๐๐๐๐๐๐๐ ๐๐๐๐ + ๐๐๐กโ๐๐๐๐ค๐๐๐ โ ๐๐๐ก ๐ถ๐๐๐ก๐๐๐๐ข๐ก๐๐๐๐
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Proportion of earnings corresponding to funds above $3 million:
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๐๐๐๐๐๐๐ก๐๐๐ ๐๐ ๐ธ๐๐๐๐๐๐๐ =
๐๐๐ต๐ถ๐ข๐๐๐๐๐ก ๐น๐๐๐๐๐๐๐๐ ๐๐๐๐ โ $3 ๐๐๐๐๐๐๐/
๐๐๐ต๐ถ๐ข๐๐๐๐๐ก ๐น๐๐๐๐๐๐๐๐ ๐๐๐๐
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Tax liability:
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๐๐๐ฅ ๐ฟ๐๐๐๐๐๐๐ก๐ฆ = 15 ๐๐๐ ๐๐๐๐ก ร ๐ธ๐๐๐๐๐๐๐ ร ๐๐๐๐๐๐๐ก๐๐๐ ๐๐ ๐ธ๐๐๐๐๐๐
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Examples
Balance exceeding $3 million
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 Warrensโ calculated earnings and additionalโ tax liability are:
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Balance growth
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$4.5 million - $4 million
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= $500,000
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Proportion of earnings > $3m
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($4.5 million - $3 million) รท $4.5 million
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= 33%
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2025-26 tax liability
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15% ร $500,000 ร 33%
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=$24,750
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Adapted from Better Targeted Superannuation Concessions
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Earnings calculation
Carlos is 69 and retired. His SMSF has a superannuation balance of $9 million on 30 June 2025, which grows to $10 million on 30 June 2026.
He draws down $150,000 during the year and makes no additional contributions to the fund.
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Earnings calculation
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$10 million - $9 million + $150,000
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= $1.15 million
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Proportion of earnings > $3m
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($10 million - $3 million) รท $10 million
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= 70%
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2025-26 tax liability
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15% ร $1.15 million ร 70%
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= $120,750
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Adapted from Better Targeted Superannuation Concessions
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