What The New Superannuation Tax Changes Could Mean For You

If you’ve been keeping an eye on the news (or your super balance), you might’ve heard about the Labor Government’s proposed changes to superannuation tax. It’s causing a bit of buzz (and panic) amongst higher earners and future retirees – we’re not here to argue whether it’s fair though. And we’re definitely not here to give you financial advice! We are here to break the proposed change down in plain english.

Here’s what the changes are, who they may effect and a numbers example for you. While we’re here, we’re also reminding you about super changes that are definitely coming (because they’ve already been passed).

What’s (probably) changing?

From 1 July 2025 if you’ve got more than $3 million in your super, the earnings on anything above that amount will be taxed at 30% instead of the usual 15%.

Before you tune out because you “don’t have that super balance, not my problem”, that $3 million cap isn’t indexed to inflation. What feels like a high threshold today might not be so high in 10 or 20 years, especially if you’re young and steadily building your balance.

The tax will also apply to unrealised gains. That means you could be taxed on the increase in value of your investments, even if you haven’t sold them and made actual money yet.

Who does this effect now?

At the moment only about 80,000 Aussies are expected to be affected when this kicks in, roughly 0.5% of account holders. However because that $3 million isn’t going to move with inflation, a lot more people could get caught up in it over time, some estimates say half a million might be affected down the track.

If you’re in your 20s or 30s now and doing well financially, this could very well be your future problem. But! Let’s not get too ahead of ourselves and worry over something that hasn’t happened. We wouldn’t be surprised if there are changes made to this initial policy and inflation does become indexed.

Super Tax Example: how much more could you pay?

Let’s say you’re an Aussie with $4 million in super by the 2025–26 financial year. Here’s what happens under the new rules:

1. Balance over the cap

• Your total super: $4 million
  
• The tax-free threshold: $3 million
  
• Amount subject to the extra tax: $1 million
  

2. Earnings for the year (unrealised and realised)

Let’s say your investments go up in value (on paper or through income) by 10% – that’s $400,000 in earnings on your $4 million balance.

• Earnings attributed to the $1 million over the cap:
  $400,000 x ($1M ÷ $4M) = $100,000
  

3. Additional tax applied
That $100,000 gets hit with the extra 15% tax (on top of the usual 15%).

• Additional tax = $100,000 x 15% = $15,000
  

So, under the proposed changes, you would pay $15,000 more in tax that year, for having $1 million over the $3 million cap.

What’s upset some people?

• Taxing paper profits – Being taxed on gains you haven’t even realised yet feels risky and a bit unfair, especially when markets go up and down.
• No inflation adjustment – That $3 million might feel like a lot now, but in 20 years? Not so much. Let’s see if this initial approach eventuates in the long term though.
• Property owners in SMSFs – Got a self-managed fund with property? You might be forced to sell stuff just to pay the tax. Again we’d like to reinforce how few people this will effect and that these individuals will be in a very secure financial position.
• Exemptions for politicians – Some high-up government figures, like judges and former premiers, are exempt due to constitutional quirks. That doesn’t sit well with many.

What’s Labor saying?

The government reckons this is a “modest” reform aimed at making the super system more sustainable. Treasurer Jim Chalmers has said the current system gives too much of a tax break to the wealthiest Aussies, and this is about rebalancing things.

Fair enough, but the lack of indexation and the way it taxes unrealised gains have made it a hot-button issue.

Other incoming super changes…

This new tax isn’t the only thing changing in super-land. Here’s what else is happening:

• Super Guarantee increase: From 1 July 2025, employers will have to bump super contributions from 11.5% to 12% of your wages.
• Transfer Balance Cap rising: That’s the cap on how much you can move into a tax-free retirement account. It’s going up from $1.9 million to $2 million.
• Payday super is coming: From 1 July 2026, your boss will have to pay your super at the same time as your wages. No more quarterly waiting game. Business owners, you need to be all over this one! No one wants to pay super guarantee charges for missing payment dates.

So what’s our non-financial advice?

If you’ve got a high super balance (or plan to), now’s the time to:

• Chat with a financial adviser, especially if you’ve got an SMSF or hold big assets like property. We know just the people!
• Keep an eye on your balance and the rules as they evolve.
• Consider your long-term retirement strategy. These changes might make a difference to how you want to grow and draw down your super.

Frequently Asked Questions

What is the new superannuation tax, and how might it affect business owners?

The new superannuation tax is set to begin on 1 July 2025. It applies to individuals with over $3 million in super, including many business owners with strong-performing funds or SMSFs.

Under the new rule, earnings on any amount above the $3 million threshold will be taxed at 30% instead of the standard 15%. This includes unrealised gains, meaning you could be taxed on the increased value of assets even if you have not sold them.

While this change does not directly impact business operations, it could significantly affect your personal retirement strategy or the structure of your self-managed super fund.

If you are a high-earning business owner, this is the right time to speak to our VCFO team. We can model future scenarios, help assess your exposure, and guide your super planning in line with your broader financial goals.

How does this affect SMSF property holders?

If your self-managed super fund (SMSF) holds property, the new rules could hit harder. Because unrealised gains are included, any increase in property value within the SMSF could trigger tax, even if you do not sell the property. This can create cash flow stress for funds that are asset-rich but low on liquid reserves.

Our team works closely with SMSF specialists to help clients run scenario testing, plan property timing, and manage their portfolio with greater flexibility. If you are managing commercial or residential assets through your fund, chat to us about SMSF structuring and tax planning support.

I am close to the $3 million cap. Should I be worried?

If your super is tracking well and you are in your 30s, 40s or 50s, you could eventually cross the $3 million threshold. The cap is not indexed for inflation, so even those who are not affected now could be caught in the future. For growing businesses and entrepreneurs, this is more than a theoretical risk.

Our business advisory team can help you map out your super growth trajectory, model the long-term tax impact, and collaborate with licensed financial advisers for tailored strategies. The earlier you plan, the more options you have.

What are the key features of the new superannuation tax rules?

Here is a quick breakdown of how the new rules work:

• A 30% tax applies to earnings on super balances over $3 million
• Both realised and unrealised gains are included
• The $3 million threshold is not indexed for inflation
• Some high-ranking government officials are exempt due to constitutional rules

These rules aim to reduce tax concessions for wealthier account holders, but they have raised concerns about fairness, sustainability, and forced liquidity events in SMSFs.

Why is the government introducing this change?

The government has framed the new superannuation tax in Australia as a way to make the super system more equitable. Treasurer Jim Chalmers argues that very high balances benefit from overly generous tax concessions, and this reform helps to rebalance the system.

Critics are concerned about the non-indexed cap, the inclusion of unrealised gains, and the complexity it adds for retirement planning. If your finances are tied into long-term super strategies, now is a good time to start future-proofing.

Can you give an example of how much more tax might apply?

Let’s say you have $4 million in super by 2025–26. You are $1 million over the cap. If your investments return 10% that year, you earn $400,000. Based on the formula, $100,000 of that gain would be attributed to the amount over the cap.

That portion is taxed at an additional 15%, which equals $15,000 in extra tax. This is on top of the usual 15% applied to all your earnings. Our VCFO services can help you calculate these scenarios and plan accordingly.

What are some common concerns about the new tax?

Key issues raised by individuals and financial planners include:

• Taxing paper profits that may disappear if markets drop
• Lack of inflation adjustment, pulling more people into the net over time
  
• Risks to property holders in SMSFs needing to sell assets to cover tax
• Exemptions for some public roles create inconsistency

These concerns have triggered ongoing policy debate, and adjustments may occur before rollout.

Are there other super changes business owners should know about?

Yes. Alongside the new tax, other confirmed reforms are coming into effect:

• From 1 July 2025, the Super Guarantee increases to 12%
• The Transfer Balance Cap will rise from $1.9 million to $2 million
• From 1 July 2026, payday super becomes mandatory, super must be paid at the same time as wages

These changes will directly affect employers. Our payroll and compliance team can help you get your systems ready in advance, especially if you use platforms like Xero or MYOB. Avoid penalties by preparing early.