Understanding the proposed tax on super balances over $3 million, effective from July 2025
The Australian Government implemented a new tax setting for superannuation balances over $3 million, effective from 1 July 2025. Investment earnings (including interest, dividends, and capital gains) on the portion of a super balance above $3 million are now taxed at 30%. This is an additional 15% on top of the existing 15% tax rate for super in the accumulation phase.
Previously, superannuation earnings in the accumulation phase were taxed at a maximum of 15%. Under the new rules, if your total super balance exceeds $3 million, the earnings on the amount above this threshold are taxed at 30%. For example, if you have $3.5 million in super, the first $3 million of earnings are taxed at 15%, and the remaining $500,000 at 30%.
Unrealised gains refer to the increase in value of assets (like property or shares) that you still own and have not sold. Normally, tax is only paid when you sell an asset and realise a profit. Under the new law, tax is calculated on both realised and unrealised gains, meaning you may owe tax even if you haven't sold any assets. If your super fund's value falls (an unrealised loss), that loss can be carried forward to offset future tax bills.
Taxing unrealised gains is unusual in Australia and means some people need to sell assets to pay their tax bill, even if they haven't received any cash income. Critics argued this could reduce investment returns for all super members and may be unfair, especially if asset values fluctuate. Supporters said it targets very large balances and helps fund government priorities.
The $3 million threshold is not currently indexed to inflation. Over time, this means more people could be affected as the real value of $3 million decreases. Some have called for the threshold to be indexed so it keeps pace with inflation or wage growth.
The tax is generally paid by your super fund directly to the Australian Tax Office. For self-managed super funds, payment is usually made via BPAY or card. If your fund records an unrealised loss, it can be used to offset future tax bills.
The proposal sparked significant debate among policymakers, economists, and the public. Some experts argued for alternative approaches, while others supported the change as a way to make the super system more sustainable. The law was debated in parliament and ultimately passed with modifications.
The tax was debated in parliament in 2024 and passed into law. It has been in effect since 1 July 2025. The government implemented the changes as planned, with the $3 million threshold remaining unindexed. The tax is now actively being collected from affected superannuation funds.