Preparing for the New $3m (and $10m) Super Tax
If you've been following financial news lately, you've probably seen headlines about new taxes on large superannuation balances. The noise can be overwhelming, and it's easy to feel uncertain about what these changes might mean for you.
Let's cut through the confusion and look at what's actually being proposed.
What's being proposed?
The government has proposed an additional tax on super earnings for balances above $3 million. It's called Better Targeted Superannuation Concessions (BTSC).
The keyword here is proposed. While the government has announced practical changes to the policy design following stakeholder feedback, legislation hasn't passed by parliament yet. The proposed start date is 1 July 2026, with the first tax assessments are likely in the 2027-28 financial year.
That means there's time to understand your position without rushing into decisions you might regret.
The revised policy introduces two thresholds:
Balances between $3 million and $10 million
An additional 15% tax applies to the proportion of realised earnings corresponding to your balance above $3 million. Combined with the existing 15% tax, the total rate on that portion will be 30%.
Balances above $10 million
An additional 25% tax applies to the proportion of realised earnings corresponding to your balance above $10 million. Combined with the existing 15% rate, the total rate on that portion will be 40%.
Less than 0.5% of Australians with super accounts will be affected by the $3 million threshold. The $10 million threshold affects less than 0.1%.
How the proportional tax works
This is where many people misunderstand the policy. The additional tax doesn't apply to your entire balance. It applies proportionally, based on how much of your balance exceeds the thresholds.
Let's say you have a total super balance of $4.5 million, and your super fund attributes $300,000 in realised earnings to you in a year.
Only $100,000 of your $300,000 earnings relates to the balance above the threshold (33.33% of it). The additional 15% tax on that $100,000 equals $15,000 - not $45,000, as many people assume when they hear "30% tax.
The closer your balance is to the threshold, the smaller the proportional impact.
Understanding realised earnings
The new approach intends to focus on realised earnings, which align more closely with existing income tax concepts. It means unrealised gains - like an increase in the value of property held in your SMSF - won't trigger tax until those gains are actually realised through a sale or other taxable event.
Your super fund will report the required data, and the ATO will calculate and assess your liability. If you're a member of multiple funds, the ATO will combine your total realised earnings across all your interests.
Thresholds will rise with inflation
Both the $3 million and $10 million thresholds will now be indexed to the Consumer Price Index (CPI), unlike the original proposal.
The $3 million threshold will increase by $150,000 increments, and the $10 million threshold will increase by $500,000 increments. This means fewer people will be caught over time as the thresholds rise with inflation. Indexation matters because it prevents bracket creep. Without it, inflation alone would gradually pull more people into the net.
Who needs to pay attention?
Super balances below $3m
These changes won't affect you.
Super balances approaching $3m
Now is the time to model scenarios. Small changes in your contribution strategy or withdrawal timing could affect whether you cross the threshold and by how much.
Super balances between $3-10m
Assess whether restructuring makes sense. For many people in this range, super will still be more tax-effective than holding investments personally or in a trust.
Super balances above $10 million
Careful planning is needed. Work through the numbers to see what role super should play in your broader wealth structure.
Super remains tax-effective
Even with these changes, superannuation offers significant tax advantages. Personal marginal tax rates reach 47% (including the Medicare levy). A 30% rate on earnings above $3 million is still competitive. A 40% rate on earnings above $10 million is higher, but it's not prohibitive - especially when you consider the estate planning and asset protection benefits super can provide.
Super policy has always evolved. Contribution caps, pension caps, and withdrawal rules have all changed over the years. That's unlikely to stop, which is why long-term planning needs to stay flexible, not rigid.
What not to do
Don't withdraw large amounts from your super in a panic. Depending on your age and circumstances, that could trigger significant tax or reduce your ability to recontribute later.
Don't make structural changes based on speculation about what parliament might or might not pass. The policy could still be amended, and timing matters.
Don't assume a single strategy will suit everyone at the same balance level. Your age, retirement plans, other assets, income needs, estate goals, and family circumstances all shape what makes sense for you.
What to do instead
Start by understanding where you sit and consider different scenarios.
Where is your balance now, and where will it likely be by 30 June 2027?
What happens if your balance grows by 5 or 10%?
What if you stop making concessional contributions?
What if you start a pension?
Consider your whole financial position, not just your super.
How much do you have outside super?
What are the tax implications of holding those assets in different structures?
Talk to someone who can help you work through the numbers in context. That means looking at tax, cash flow, estate planning, and your goals together - not in isolation.
The role of good advice
Good advice doesn't chase headlines or recommend one-size-fits-all strategies. It helps you understand where you stand, what your options are, and what trade-offs each option involves.
At Accounting Heart, we work with clients to model these scenarios and assess their personal exposure. Our role is to guide informed decisions with confidence and perspective.
Key takeaways
The proposed super tax changes are significant, but they can easily be misinterpreted. The additional tax applies proportionally to earnings above the thresholds, not to entire balances. Both thresholds will now be indexed, and the policy won't take effect until 1 July 2026 at the earliest.
For many Australians with high super balances, superannuation will remain one of the most tax-effective environments available.
If you're concerned about how these proposed changes might affect you, the first step is to understand your position. From there, we can help you plan thoughtfully, not reactively.
Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and/or other advice as may be appropriate having regard to their particular circumstances.