Proposed Superannuation Changes

The Government has announced that they intend to change the tax concessions on superannuation accounts, if you have a total super balance of more than $3 million.

Currently, the government charges 15% tax on superannuation fund earnings, while you are still working and contributing money into super – this is known as the “accumulation phase.”

The increase to a tax rate of 30% will only apply to fund earnings in accounts with $3 million or more during the accumulation phase. The key points are:

  • The tax increase will not take effect until after the next election (July 2025).
  • Earnings on amounts in the accumulation phase above $3 million, will be taxed at an additional 15% on top of the existing rate of tax (15%), bringing the total tax payable to 30%.
  • The Government says the decision is about making superannuation more sustainable.

The increased tax is expected to apply to around 80,000 people, who will continue to benefit from generous tax breaks on earnings below the $3 million threshold. The increased tax will be paid by fewer than 0.5% of all superannuation accounts in Australia – i.e. 99.5% of all super accounts in Australia will be unaffected.

These changes will net the government budget approximately $2 billion a year.

Importantly, “retirees” with super in the “pension phase,” pay no tax whatsoever on any earnings, up to a current maximum account balance of $1.7 million per person.

As an example, a pension fund with $1.7 million, earning 5% in a given financial year, equates to $85,000 tax-free. By way of comparison, a wage earner who is paid $85,000 in a given financial year will be taxed at approximately $19,800 per year (including the Medicare Levy)!

The government has been at pains to point out it is not coming after people’s super balances, and 99.5% of Australians will be completely unaffected by the changes.

However, various expert superannuation commentators have stated that because the $3 million amount won’t be indexed (at this stage), the compounding earnings within super will push more Australians above the $3 million balance level over coming decades


According to the Financial Services Council (FSC), “If the government does not index the proposed  $3 million amount,  approximately 500,000 Australian taxpayers will be affected in the future.” As an example, a  30-year-old will have a real cap of around $1 million in today’s dollars, calling into question the intergenerational fairness of an unindexed cap.

No doubt, there will be much discussion/debate in Parliament, over the coming months, regarding the exact mechanics of how this new scheme will be implemented.

CFP® | BSc(Ma)

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