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.