For those exceeding the $3m superannuation threshold, the Government has recently announced the available tax concessions for this cohort will be reduced. The change brings the headline tax rate on superannuation earnings corresponding to the proportion of the balance greater than $3 million to 30 per cent. If this applies to you, or you are appoaching the $3m threshold, read on for our analysis.
What is the change?
Off the back of the Governments proposed legislating of the ‘Objective of Super’ (read about it here) in which one of the key components is equality, the Government has now proposed a $3 million soft cap for superannuation. This proposal is that from 1 July 2025, individuals with a total super balance (TSB) above $3 million dollars will be subject to an additional 15% tax on earnings.
Who does this affect?
The additional tax will affect everybody who has a TSB above $3m at the end of the financial year, including those with balances in self-managed superannuation fund, retail and industry funds.
How it works – calculating earnings and additional tax
Earnings are calculated with reference to the difference in an individuals TSB at the start and end of the financial year, with adjustments made for withdrawals and contributions.
The proportion of earning which relates to the individual balance above $3m is then calculated and then 15% tax is applied.
The following has been taken from the Treasury fact sheet which can be accessed here.
If an individual makes an earnings loss in a financial year, this can be carried forward to reduce the tax liability in future years.
After lodgement of your superannuation funds annual return, the ATO will issue you a notice of assessment detailing the additional tax payable. Individuals will have a choice to pay the tax personally or release the amount from their superannuation fund.
It is expected that the first notice of assessment for the additional tax will be issued in the 2026-27 financial year.