Will your superannuation balance be over $3 million at 30 June 2025?

The Government has announced that the concessional tax rate on earnings from superannuation will increase from 15% to 30% for those with total super balances (TSB) of $3m or more from 1 July 2025. This will be after the next federal election so we will need to await the results of that to see where this goes in the upcoming campaign and following the election. The measure is expected to impact around 80,000 people (or 0.5% of people with super accounts) but will generate $2 billion in revenue in its first full year and $3.2 billion over five years.

An additional tax of 15% on earnings will apply to individuals with a TSB over $3 million at the end of a financial year. This tax is in addition to any tax their superannuation funds pay on earnings in accumulation. The tax only applies to the proportion of earnings corresponding to balances above $3 million. This means that earnings corresponding to funds below $3 million will continue to be taxed at 15 per cent or less.

The proposed calculation aims to capture growth in TSB over the financial year allowing for contributions and withdrawals. This method captures both realised AND unrealised gains, enabling negative earnings to be carried forward and offset against tax liabilities in future years.

Individuals will have the choice of paying the tax personally or from their superannuation fund and those with multiple accounts can nominate which fund will pay the tax.

Much like Division 293 tax, the Australian Taxation Office (ATO) will perform the calculation for the tax on earnings. TSBs in excess of $3 million will be tested for the first time on 30 June 2026 with the first notice of assessment expected to be issued to those impacted in the 2026-27 financial year.

The announcement doesn’t propose any changes to the transfer balance cap or the amount that a member can have in the tax-free retirement phase. Additionally, the tax-free status of eligible superannuation withdrawals from age 60 onwards will remain unchanged.

The above information is only general in nature and should not be considered specific advice.  Each individual’s circumstances need to be assessed. For more information on any of the above please book an appointment at Avance.

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