Tax rate increase for superannuation balances over $3m

The federal government will introduce an additional tax to superannuation earnings on balances of more than $3 million.

The new tax, announced by Prime Minister Anthony Albanese and Treasurer Jim Chalmers, will come into effect from 2025-26 and will apply to approximately 80,000 people, leaving 99.5 per cent of Australians unaffected.

Mr Chalmers said the “modest change” would make Australia’s superannuation system “more sustainable and fairer”.

While the measure will only impact a small number of people, it will generate about $2 billion in revenue in its first full year.

Those impacted will retain the current 15 per cent concessional tax rate on income from funds below the threshold and the current rate will remain unchanged for all superannuation accounts with balances below $3 million.

From 2025‑26, the proportion of earnings attributable to balances over $3 million will attract an additional 15 per cent tax.

“This adjustment does not impose a limit on the size of superannuation account balances in the accumulation phase. And it applies to future earnings – it is not retrospective,” Mr Chalmers said.

“This modest adjustment is consistent with the government’s proposed objective of superannuation, to deliver income for a dignified retirement in an equitable and sustainable way.”

Breaking down the new superannuation tax measure

The government currently charges 15 per cent tax on income in supernation, but only while an individual is still working and contributing money into their fund, which is known as the accumulation phase.

Income on superannuation benefits in the retirement phase will remain tax exempt.

Under the government’s new proposal, an additional 15 per cent tax will apply to the proportion of earnings attributable to balances above $3 million. The new tax applies regardless of whether benefits are in accumulation phase or retirement phase.

Earnings for the purpose of determining the new tax is not limited to taxable income, but includes all fund earnings such as unrealised capital gains.

Once calculated, the tax will be levied on the individual rather than the superannuation fund. The individual may elect for the tax to be paid from the superannuation fund.

The new measure does not change the amount that superannuation is taxed when it is contributed by an employer or individual before tax.

Speak to the superannuation experts

If you’ve been impacted by the change to tax on superannuation and need advice on how to navigate the next steps, speak to the superannuation experts at LDB Group.

Give us a call on (03) 9875 2900 or send us a note via the contact form below.