The Federal Government has announced significant changes to its proposed new superannuation tax, following strong feedback from the community and industry.
While we only have an announcement and a Fact Sheet on these changes at present, we thought it was prudent to keep you informed of the developments.
What’s changed?
The two most criticised features of the original proposal have been dropped:
- No tax on unrealised gains – tax will now only apply to realised earnings.
- Thresholds will be indexed – both the $3 million and $10 million thresholds will increase over time.
The new measures will also be delayed until 1 July 2026, meaning the first relevant date will be 30 June 2027.
How will the new rules work?
The extra tax will still apply personally to individuals with high super balances, based on their share of taxable earnings across all their superfunds. Members can choose to pay the tax personally or from their super.
There will now be two thresholds
- $3 million threshold: An extra 15% tax on earnings (total 30%) relating to the portion of your balance over $3 million.
- $10 million threshold: A further 10% on earnings (total 40%) relating to the portion of your balance over $10 million.
Other important details
Super funds will calculate earnings based on taxable income, aligned with existing tax principles.
- Super funds will calculate earnings based on taxable income, aligned with existing tax principles.
- The treatment of capital gains discounts and pensions is still to be confirmed.
- The ATO will issue further details once legislation is introduced, expected early in 2026 after consultation.
What does this mean?
Overall, this is a better-designed system than the original proposal. Removing the tax on unrealised gains addresses a major flaw that could have created liquidity issues for many members.
That said, individuals with super balances above $10 million will face a significantly higher effective tax rate (up to 40% on part of their earnings), and those with large unrealised gains built up before 1July 2026 may need to consider their position before the new rules take effect.
We’ll keep a close eye on the legislation once released and will be in touch with any key updates or planning opportunities that arise. If you’d like to discuss how these changes might affect you, please don’t hesitate to contact us.
