The Federal Government has responded to industry feedback on its proposed new tax for superannuation balances exceeding $3 million, announcing several significant adjustments aimed at making the measure fairer and more practical.*
*Note: However, the proposal is not yet legislated, and further consultation with industry stakeholders is expected before it is introduced to parliament. If passed by parliament, the measure will begin from July 2026.On 13 October 2025, Treasurer Jim Chalmers provided a long-awaited announcement regarding the status of the proposed Division 296 tax on superannuation balances exceeding $3 million, confirming it would proceed effective 1 July 2026 but with some significant changes to the methodology and thresholds – such as the exclusion of unrealised capital gains from the tax.
While the revised proposal is arguably more positive for most individuals than the previously announced versions, this change in approach means many people with large or growing superannuation balances will need to take yet another turn on the road to planning the most suitable structures in which to hold their wealth
Under the revised proposal:
- Indexation of the cap – the $3 million threshold will be indexed to CPI, increasing in $150,000 increments to reflect inflation
- Tiered tax rates – earnings on super balances between $3 million and $10 million will attract a 30 per cent tax, while balances above $10 million will face a 40 per cent rate on the proportion above that amount. The $10 million cap will be indexed in $500,000 increments
- Removal of tax on unrealised gains – importantly, the government has dropped the contentious plan to tax unrealised earnings, opting instead to tax actual income, aligning the proposal with established Australian tax principles
- Deferred commencement – the measure will now start from 1 July 2026, with the first notices of assessment expected in the 2027–28 financial year.
Treasury example
To illustrate how the changes will work in practice, Treasury provided the following example:
Megan, aged 58, has a total superannuation balance of $4.5 million, with $2.3 million in an APRA-regulated fund and $2.2 million in an SMSF.
In the 2026–27 financial year, she earns $300,000 in realised income ($100,000 from her APRA fund and $200,000 from her SMSF).
The proportion of her balance above the $3 million threshold is 33.33 per cent, with no portion above $10 million. Her additional tax under the proposed Better Targeted Superannuation Concessions (BTSC) measure would therefore be: $15,000 = 0.15 × 0.3333 × $300,000
What does this mean for super fund members?
The proposed tax increase was announced more than two years ago and was meant to be in effect from July 2025. However, it was met with criticism, and the bill was never introduced to parliament.
The revised proposal represents a positive shift, particularly the removal of the unrealised gains component, which was a major concern for many investors and advisers.
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