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Home / SMSFs / SMSF strategies and checklists / Tax hike on super balances above $3 million: Is it time to rethink our retirement savings vehicles?

Tax hike on super balances above $3 million: Is it time to rethink our retirement savings vehicles?

Another year and yet another announcement from the Australian government on intended changes to our superannuation system! No wonder the overall confidence with the retirement savings incentives in Australia continues to decline.

A quick look at the changes

Commencing 1 July 2026, the tax rate levied on super fund earnings for members with balances above $3 million will double from 15% to 30%.

Some of the key points to note with these proposals include:

  • 15% additional tax on the proportion of earnings corresponding to the TSB between $3 million and $10 million
  • 25% additional tax on the proportion of earnings corresponding to TSBs above $10 million
  • The tax is applied per member and not per fund.
  • The $3 million and $10 million thresholds will be indexed for inflation.
  • The proposed changes are not designed to apply a specific limit on super fund account balances. They are designed to apply a higher rate of tax on fund earnings for balances above $3 million. 

Learn more about the new Division 296 rules.

Although these proposed changes apply to most superannuation fund types, they will have a much greater effect on the members of SMSF’s due to their higher average member balances and the investments held within these funds.

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Response

  1. Mark Bradbury Avatar
    Mark Bradbury

    Hi Garth, I think that we need to be careful about calling this as a 30% tax rate as this will never really be the case. There are some very good articles on the Firstlinks website detailing the real calculation methods and the fact that it amounts to an additional up to 15% tax surcharge on the Super earnings particularly as it’s only on the proportion the the earnings deemed (including unrealised gains) to be allocated from those assets that are above the $3M mark, ie only 25% of income if the balance was $4M.
    It may also be the case that 0% tax is being paid on the base income generated if that income is generated from a pension account that has grown to be in excess of $3M, although unlikely at the moment definitely not impossible in future years especially if starting at $1.9M next year and drawing down minimum pension amounts. I estimate my own account will be there within five years.
    Regards Mark

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