The government recently released draft legislation detailing significant changes to superannuation tax concessions for wealthy Australians. From the 2026 income year onwards, individuals with total super balances exceeding $3 million will face an additional 15% tax on the portion of their earnings derived from balances over this threshold.
Who does the new $3 million cap apply to?
The new rules will apply to anyone with a total super balance over $3 million at 30 June . This cap amount is not currently indexed for inflation either.
How will earnings above $3 million be taxed?
Earnings derived from super balances in excess of $3 million will be taxed at 30% instead of the standard 15% concessional tax rate . This 15% additional tax will apply to a percentage of earnings equal to the percentage owned above $3 million.
For example, an individual with a $4 million super balance would have 25% of their total super balance exceeding $3 million. Therefore, 25% of their annual fund earnings would be subject to a 30% tax rate.
The ATO will base the earnings calculation on what is reported on the individual’s annual tax return. Any negative earning amounts from balances over $3 million can offset future earnings.
What should high balance members do?
This policy change limits the tax effectiveness of making further super contributions for those nearing a $3 million total super balance. Alternative investment strategies should be explored, and advice should be sought on managing retirement income streams in a more tax efficient manner.