How superannuation changes will affect wealthy Australians

 Big changes are coming to Australia’s superannuation system and if you have a super balance of more than $3 million, it’s time to pay attention. 

The federal government announced more than two years ago that from July 1, 2025, people with super balances over $3 million will likely pay more tax on their earnings. Currently, most super earnings are taxed at 15%. But under the new rules, any earnings on the portion of your balance above $3 million will be taxed at 30%—double the usual rate. 

Although the new tax hasn’t passed into law yet, it’s set to take effect from July 1 and parliament isn’t scheduled to sit again until after that date. While there is an intention to implement this legislation, until the legislation is finalised and passed, it pays to be aware rather than panic! 

Who will the changes affect? The government has said fewer than 80,000 people will be directly affected. That’s less than 0.5% of the population. But for those people, the extra tax could be substantial. Many of those affected are older Australians who have been building up their super for decades—often through self-managed super funds (SMSFs). People with balances just under the $3 million mark won’t see any difference at tax time, no matter how high their earnings are.  

What does it all mean in practice? Let’s say someone has $5 million in their super. The new rules mean that any earnings on the $2 million above the $3 million cap will be taxed at 30%, instead of 15%. Earnings are calculated with reference to the difference in total superannuation balances (TSB) at the start and end of the financial year, adjusting for withdrawals and contributions.  

Individuals will have the choice of either paying the tax out of their own pocket or from their super funds. Individuals who hold multiple super funds can elect the fund from which the tax is paid. 

Further information/examples can be found via ministers.treasury.gov.au/sites/ministers.treasury.gov.au/files/2023-03/better-targeted-superannuation-concessions-factsheet_0.pdf 

Why is this happening? The government’s main argument is fairness. Superannuation was designed to help people save for retirement - not as a low-tax shelter for the very wealthy. Some large balances earn more in tax concessions each year than the average full-time worker earns in wages. The government says the change will make the system more sustainable and fairer for everyone in the long run. 

If you’ve got millions in super, the days of big tax concessions are starting to shift. Super is still a useful tool, but it’s no longer considered a ‘golden goose’ like it once was.