The Australian government has announced significant changes to superannuation tax rules that will affect Australians with very high total super balances. These changes, with the aim to be effective from 1 July 2026, aim to better target tax concessions on superannuation earnings above certain thresholds.
Please note that this is all yet to be legislated.
What Are the New Thresholds?
The key change introduces two balance thresholds for total superannuation savings:
• $3 Million Threshold: If your total super balance at the end of the financial year exceeds $3 million, additional tax applies on earnings above this amount. Specifically, earnings on the excess over $3 million will be taxed at an additional 15%, making the effective tax rate on these earnings 30%. The first $3 million still enjoys the usual tax concessions.
• $10 Million Threshold: For balances exceeding $10 million, a further tax rate of 40% applies—but crucially, this tax only applies to realised gains rather than unrealised gains. This change reflects a relief from earlier proposals where unrealised gains would have also been taxed, a move that had generated widespread concern.
Why These Changes Matter
These tax changes are designed to ensure superannuation tax concessions remain targeted at typical Australians saving for retirement, rather than very high-balance accounts. Only a small number of Australians—estimated to be under 100,000—hold balances above $3 million and will be affected.
Moreover, the indexing of these thresholds to inflation means fewer people will inadvertently become subject to these higher tax rates just because their balances grow due to market returns rather than additional contributions.
We are still yet to see how they will value defined benefit members but we will keep across these changes as we see further information. They had a formula for the past regulation which will likely the used.
What Should You Do?
If your super balance approaches or exceeds these thresholds, it’s more important than ever to review your retirement savings strategy. Consider:
• How your investment earnings are generated and when gains are realised.
• The timing of withdrawals or rollovers that could trigger tax on realised gains.
• Working to optimise your super structure in light of this new tax environment.
At Money Mechanics, we specialise in creating tailored strategies that fit your unique retirement goals and financial situation. These changes mean careful planning and expert advice will be essential for those impacted, to ensure your superannuation continues working hard for your retirement.
Feel free to reach out if you’d like to discuss what these changes mean specifically for you and how to plan for a tax-efficient retirement strategy.
Seek out further advice and start your journey to being free around your money and creating wealth with understanding.
Scott Malcolm has been awarded the internationally recognised Certified Financial Planner designation from the Financial Planning Association of Australia and is Director of Money Mechanics. Money Mechanics is a fee for service financial advice firm who partner with clients in Melbourne, Canberra, Newcastle and Sydney to achieve their life and wealth outcomes. Money Mechanics Pty Ltd (ABN 64 136 066 272) is a Corporate Authorised Representative (No. 336429) of Infocus Securities Australia Pty Ltd (ABN 47 097 797 049) AFSL and Australian Credit Licence No. 236523