Future earnings for super balances above $3m taxed at 30% from 2025-26
The Government has announced that from 2025‑26, the 15% concessional tax rate applied to future earnings for superannuation balances above $3 million will increase to 30%. At this stage the change is proposed. Any final legislation will come with further detail and practical measures.
The concessional tax rate on earnings from superannuation in the accumulation phase will remain at 15% up to $3m. From $3m onwards, the rate will increase to 30%.
The amendment applies to future earnings; it is not retrospective. Also, for clarity (especially for those with SMSF’s) the threshold applies to the individual’s fund balance. It is not a threshold on the fund itself (i.e. total of all members).
Practically this means that for individuals with balances over $3m, the earnings of the superannuation fund will be apportioned between those up to the $3m threshold (attracting 15%) and those over it (attracting 30%).
The change is also not a cap on how much you can have in superannuation. A cap was one of the options being considered by the government, however they opted for an increased rate of tax on earnings over the $3m threshold. You can continue to have as much as you like in superannuation in the accumulation phase.
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 (currently $1.7m, increasing to $1.9m from 1 July 2023).
The changes are expected to be legislated this year. However, they won’t come into effect until the financial year ended 30 June 2026.
80,000 people are expected to be impacted by the measure. We will assist any of our clients who may be affected with the strategic options available to them to limit the impact. However, it is important to note that, in comparison to other investment vehicles, superannuation remains the most favourable tax environment for retirement savings for most people – and will most likely continue to be into the future, even if there are further changes.