What You Need to Know About the Proposed $3 Million Super Balance Tax
The Federal Government’s proposed additional 15% tax on earnings for individuals with superannuation balances over $3 million continues to be a significant focus in the financial planning landscape. While the legislation has not yet been passed, all signs suggest it may proceed in its current form, with a likely start date of 1 July 2025.
What’s Being Proposed?
Under the draft design of the tax (known as Division 296), individuals with total super balances above $3 million would pay an extra 15% tax on the earnings attributable to the portion of their balance over the threshold1. This would effectively raise the tax rate on those earnings from 15% to 30%1.
Notably, this new tax would apply to unrealised capital gains—a key departure from existing super tax arrangements. Also, the $3 million threshold is proposed to be non-indexed, which means more individuals may be impacted over time due to natural portfolio growth 1.
Will the Tax Go Ahead?
At this stage, there is no official confirmation from the Government on whether the tax will proceed or when. However, current indications, including the Government’s budget projections and a more favourable Senate composition from 1 July 2025, suggest that the policy may be enacted largely in its original form.
What Could Change?
Two of the most debated aspects of the proposed tax—its inclusion of unrealised capital gains and the fixed $3 million threshold—have received consistent industry pushback. While changes to these elements would be relatively straightforward to implement, there has been no signal from the Government that they intend to amend them.
Investment Strategy Considerations
If the new tax is implemented, how it will affect your super depends on your investment strategy:
Income-generating assets: Interest and dividends on balances above $3 million could be taxed at around 30%, although the effective rate could vary depending on market movements1.
Capital gains: Growth assets may become less attractive within super, especially where gains are unrealised. The tax could apply to increases in market value even if the asset hasn’t been sold, potentially leading to tax being paid on “paper” gains1.
In general, super may still be the most tax-efficient structure for long-term income-focused investing. However, growth-oriented investments (like property, high-growth shares, or managed funds) may warrant review if this new tax regime proceeds.
What Planning Options Are Being Considered?
Depending on individual circumstances, options that may be explored include:
Transferring growth assets out of super if access is available
Realigning the investment mix within super to focus on income-generating assets
Holding growth assets outside of super in other structures
A combination of strategies to optimise tax outcomes and estate planning
It’s also worth noting that if the original design of the legislation is retained, individuals may have until 30 June 2026 to adjust their balance to below $3 million without triggering the new tax—despite the proposed 1 July 2025 start date.
Final Thoughts
While the tax is not yet law, it’s increasingly likely to proceed. Given the potential implications—particularly for those approaching or above the $3 million mark—it makes sense to begin reviewing super balances, investment strategies, and asset types.
As always, our role is to help you navigate these changes confidently, so you can make informed decisions that support your goals today and into retirement.
Reference
1 $3m Super Member Balance Tax (Division 296 tax) – Update for New Parliament. https://www.pitcher.com.au/insights/3m-super-member-balance-tax-division-296-tax-update-for-new-parliament/
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