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How will the proposed 30% tax on super earnings above $3m work?

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 ‘accumulation balances’, the fact sheet clarifies that it is ‘total superannuation balance’ 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.


What’s 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 don’t 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 don’t react.


Proposed earnings calculation

Earnings calculation in a financial year:

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 = 𝑇𝑆𝐵𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙𝑌𝑒𝑎𝑟 − 𝑇𝑆𝐵𝑃𝑟𝑒𝑣𝑖𝑜𝑢𝑠𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙𝑌𝑒𝑎𝑟 + 𝑊𝑖𝑡ℎ𝑑𝑟𝑎𝑤𝑎𝑙𝑠 − 𝑁𝑒𝑡𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛𝑠


Proportion of earnings corresponding to funds above $3 million:

𝑃𝑟𝑜𝑝𝑜𝑟𝑡𝑖𝑜𝑛 𝑜𝑓 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 =

𝑇𝑆𝐵𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑌𝑒𝑎𝑟 − $3 𝑚𝑖𝑙𝑙𝑖𝑜𝑛/

𝑇𝑆𝐵𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙𝑌𝑒𝑎𝑟


Tax liability:

𝑇𝑎𝑥𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦 = 15 𝑝𝑒𝑟𝑐𝑒𝑛𝑡 × 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 × 𝑃𝑟𝑜𝑝𝑜𝑟𝑡𝑖𝑜𝑛𝑜𝑓𝐸𝑎𝑟𝑛𝑖𝑛𝑔


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 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 liability

15% × $500,000 × 33%

= $24,750

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.

Earnings calculation

$10 million - $9 million + $150,000

= $1.15 million

Proportion of earnings > $3m

($10 million - $3 million) ÷ $10 million

= 70%

​​​​2025-26 tax liability

15% × $1.15 million × 70%

= $120,750


Disclaimer: The material and contents provided in this article contains general information and does not take into account your personal objectives, financial situation or needs. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, please contact Peer Wealth on (02) 8014 7608.




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